US Consumers Remain Resilient in August as Spending Tops Estimates

Shoppers shrug off modest price pressures last month, according to new PCE data.

American Eagle Outfitters store at the Mall of America in Bloomington, Minn., on Aug. 29, 2025. Madalina Kilroy/The Epoch Times

Consumers continued to support the U.S. economy as they opened their wallets in August, shrugging off modest increases in price pressures.

Personal consumption expenditures increased by 0.6 percent, surpassing the market consensus of 0.5 percent, according to a Bureau of Economic Analysis (BEA) report published on Sept. 26. This was up from the previous month’s 0.5 percent gain, signaling the continued resilience of U.S. consumers.

Income and spending data came in better than Wall Street’s expectations.

Personal income increased at a higher-than-expected pace of 0.4 percent, driven by modest broad-based gains in wages and salaries, interest and dividend income, and government transfer receipts.

The personal saving rate declined for the fourth straight month to 4.6 percent.

Inflation in the annual Personal Consumption Expenditures (PCE) price index—the Federal Reserve’s preferred inflation measure—rose to 2.7 percent in August from 2.6 percent in the previous month,

On a monthly basis, the PCE price index jumped 0.3 percent, up from 0.2 percent in July.

Excluding the volatile energy and food categories, inflation in the core PCE price index was unchanged at 2.9 percent year over year. The index also rose 0.2 percent for the second consecutive month. All readings were in line with economists’ forecasts.

U.S. stocks added to their gains following the PCE data in pre-market trading, while Treasury yields mostly slipped.

Looking ahead to the September batch of inflation reports, early estimates suggest that price pressures will continue to build.

The headline annual inflation rate in the Consumer Price Index is expected to reach about 3 percent for the first time since January, according to the Cleveland Federal Reserve’s Inflation Nowcasting Model.

Implications for the Federal Reserve

Monetary policymakers are unlikely to be swayed by the recent figures.

Federal Reserve Chair Jerome Powell reiterated that the likely base-case scenario is that the current administration’s tariffs will lead to a one-time price adjustment rather than a prolonged period of inflation. In other words, tariff-driven inflation is expected to be transitory.

“We will make sure that this one-time increase in prices does not become an ongoing inflation problem,” Powell said at the Sept. 23 Greater Providence Chamber of Commerce event.

Other Fed officials have expressed concern about the simultaneous risks to the central bank’s dual mandate—maximum employment and price stability—and suggested an even more conservative outlook for interest rates than what was written in the Summary of Economic Projections.

Workers clean and paint an eagle statue on the Marriner S. Eccles Federal Reserve Board Building, the main offices of the Board of Governors of the Federal Reserve System in Washington on Sept. 16, 2025. (Kevin Dietsch/Getty Images

Chicago Fed President Austan Goolsbee, speaking at an event in Grand Rapids, Michigan, voiced concern about “front-loading too many rate cuts based just on the payroll jobs numbers slowing down.”

“If we are in this environment where inflation’s been above the 2 percent target for almost five years in a row now, and it’s going the wrong way, just counting on the inflation to be transitory makes me uneasy,” Goolsbee said during the discussion.

Next week, the Bureau of Labor Statistics will release the September jobs report. Early forecasts indicate that the U.S. economy added 50,000 new jobs and that the unemployment rate held steady at 4.3 percent.

Economic observers analyzed the latest claims data to assess the health of the labor market.

The number of Americans filing new applications for unemployment benefits declined by 14,000, to a lower-than-expected 218,000 for the third week of September, according to the Department of Labor.

The final estimate for second-quarter gross domestic product was released on Sept. 25, showing the GDP growth rate was 3.8 percent, higher than the initial estimate of 3 percent and up from the 0.6 percent contraction in the first three months of 2025.

The GDP figures were unsurprising, considering solid employment and consumer spending data, Gina Bolvin, president of Bolvin Wealth Management Group, said.

“With jobless claims and retail sales both coming in stronger than expected, it’s no surprise that GDP has also exceeded forecasts,” Bolvin said in a note emailed to The Epoch Times. “The old saying ‘Don’t fight the Fed’ should be revised to ‘Don’t fight the U.S. consumer.’ Thanks to them and the wealth effect from rising stock prices, this economy is doing just fine!”

The futures market is betting on another quarter-point interest rate cut at the October Federal Open Market Committee (FOMC) policy meeting.

New data from the CME FedWatch Tool show an 88 percent chance of a 25-basis-point reduction to the federal funds rate from the current target range of 4 percent to 4.25 percent.

Expectations for another cut at the December meeting have diminished slightly over the past week. While investors are concentrating on what will happen between now and the year’s end, Fed Governor Michael Barr suggests focusing on the broader picture of interest rates.

“I do think the most likely direction of travel, the base case, is that it will be appropriate to reduce rates over time,” Barr said at a Sept. 25 Peterson Institute for International Economics event. “I just think we need to be cautious about how we do that.”

Fed officials anticipate the policy rate will settle at around 3 percent by the end of 2027.