U.S. consumer spending grew by only 0.1 percent in September, and core U.S. consumer prices rose by an expected 0.2 percent. However, a yearly inflation index remained close to an 11-year high in a sign of persistent inflation risk, a government report said on Monday. The Commerce Department's 12-month rate of core inflation-which excludes volatile energy and food-registered a strong 2.4 percent increase in September, down slightly from a 2.5 percent gain in August, which was the biggest climb since April 1995. Overall inflation, in an index for consumer spending that includes energy and food, fell 0.3 percent in September after a 0.3 percent jump in August. The decline was largely attributed to falling gasoline prices. Consumers spent strongly on expensive items such as cars and appliances last month, but spending on gasoline, food, and clothing fell. September's increase in spending, down from a 0.2 percent gain in August, was the smallest in 10 months. Americans' incomes rose by a strong 0.5 percent in September, up from 0.4 percent in August and the biggest gain since June. With income growth outpacing spending, Americans' personal saving rate was a negative 0.2 percent in September, an improvement from negative 0.5 percent recorded in August. As the inflation figures were released, Federal Reserve (Fed) Bank of Richmond President Jeffrey Lacker, speaking in Baltimore, said core inflation was running at an unacceptable rate on a long-term basis. Historically, the Fed's comfort level for annual core inflation has been in the 1 to 2 percent range. The only dissenter in recent Fed decisions to hold rates steady, Lacker said the inflation outlook was “discomforting.”
