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US consumer spending rises 0.2 percent in September

American consumers modestly stepped up their spending in September, but their incomes grew fast enough to let them save more, too.

The Commerce Department said that consumer spending rose 0.2 percent last month, matching August’s increase but coming in slightly below economists’ expectations. Incomes grew 0.3 percent lifting the U.S. savings rate to 8.3 percent in September, highest since March.

A measure of inflation closely watched by the Federal Reserve was flat in September, even excluding volatile food and energy prices. Over the past year, it is up 1.3 percent, and 1.7 percent without food and energy.

Consumer spending accounts for about 70 percent of U.S. economic activity. The government reported  that consumer spending rose at a solid annual pace of 2.9 percent from July through September, a bright spot in a quarter when the overall economy grew a mediocre 1.9 percent.

The rising saving rate is encouraging because it suggests consumers have financial leeway to keep spending and supporting an economic expansion that has already entered a record-breaking 11th year. The savings rate had dropped to 3.2 percent in 2005 before the Great Recession.

On Wednesday, the Fed, reassured by modest inflation but worried that President Donald Trump’s tariff war with China will hobble economic growth, cut short-term interest rates for the third time this year.

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