Key US Inflation Index Falls Flat In September

Tumbling costs for fuel and manufactured goods softened US inflation last month, official data showed Thursday.

The weaker price pressure reversed some rises from August and could be seen as lending some support to the Federal Reserve's decision this week to cut interest rates.

The numbers may not reflect import tariff increases that the Trump administration imposed in September, many of which hit consumer goods and should show up on store shelves with a lag.

Meanwhile, consumer spending continued at a healthy clip at the end of the third quarter, the Commerce Department said.

In September, the price index for Personal Consumption Expenditures, the Fed's preferred inflation measure, was flat compared to August, matching economists' expectations.

Food prices were unchanged while energy costs fell for the second month in a row.

Compared to September of last year, the index, which tracks costs for goods and services purchased by individuals, slowed to a 1.3 percent gain, its weakest reading since February.

When volatile food and fuel prices are stripped out, the core index was also flat compared to August, with the 12-month measure likewise slowing to 1.7 percent, a tenth of a point slower than the month before.

Some economists say rising wages and scarce labor have begun to nudge US inflation higher.

But the Fed this week cut its benchmark lending rate for the third straight time to help insulate the US economy against risks from slowing global growth and President Donald Trump's protracted trade war with China.

Fed Chairman Jerome Powell signaled Wednesday the central bank does not expect to cut rates again soon, however.

Consumer spending in September posted a 0.2 percent gain, the same increase recorded in August, and was up 3.9 percent compared to September of last year -- a notch higher than the 12-month level seen in August, which had been the lowest since December.

Spending by consumers represents the largest share of the US economy and is now almost single-handedly supporting growth as other sectors have weakened.

Ian Shepherdson of Pantheon Macroeconomics said the consumption numbers were consistent with a fleeting bump in spending as buyers hurry to take advantage of lower prices before new tariffs hit.

"Spending growth is set to slow" in the fourth quarter," he said in a client note.

"As well as smaller-ticket tariff items, auto sales look primed to correct," he added, noting that survey data for consumers' plans to buy autos hit a six-year low in September.