Consumer spending resilient as annual price rise smallest in 3-1/2 years
Durrant Pate/ Contributor
The number of Americans filing new applications for unemployment benefits dropped to a four-month low last week, suggesting that the labour market remained fairly healthy.
Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 218,000 for the week ended September 21, the lowest level since mid-May, the United States Labour Department is reporting.
Though the labour market has lost momentum amid declining job openings and a stepdown in hiring, layoffs have remained low.
Claims fell between the August and September 2024 survey weeks. The jobless rate slipped to 4.2 per cent in August after rising to 4.3 per cent in July, as a surge in immigration boosted labor supply and raised fears of rapid labor market deterioration.
A separate report from the Commerce Department’s Bureau of Economic Analysis showed corporate profits, including inventory valuation and capital consumption adjustments, increased at a US$132.5 billion annualized rate in the second quarter.
They were revised up from the US$57.6 billion pace estimated last month. The revision reflected a sharp upgrade to domestic profits of non-financial corporations, now estimated to have increased US$108 billion instead of $29.2 billion, which could support business spending on equipment.
Upbeat in American economy
As a result, there is an upbeat outlook on the American economy, which was underscored by other data last Thursday, showing corporate profits increased at a more robust pace than initially thought in the second quarter. Analysts report strong profit growth should help to underpin the labour market and investment.
US consumer spending increased slightly less than expected in August, but that did little to change expectations that solid economic growth persisted in the third quarter, while the annual rise in prices was the smallest in just over 3-1/2 years.
Strong growth expectations this quarter were underscored by other data from the Commerce Department last Friday showing the goods trade deficit narrowed by the most in nearly two years last month. That suggested trade would likely impose a modest drag on gross domestic product, which could be more than offset by a rise in inventories.
Economists did not view the data as soft enough to compel the Federal Reserve to deliver another 50 basis points interest rate cut in November, as hoped by investors.
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