U.S. Personal Income & Spending (September 2025)

Consumer spending stalls in September

• Personal income rose 0.4% month-over-month (m/m), on par with the prior month. On an inflation adjusted basis, personal income was up just 0.1% m/m. 
• Consumer spending grew 0.3% m/m in nominal terms. This was in line with market expectations, which called for growth to slow from the 0.5% m/m pace seen in August. However, September's gain was entirely due to higher prices, as spending remained flat after adjusting for inflation. Looking at the broad categories, consumers dialled back their spending on goods (-0.4% m/m), led by reduced spending on motor vehicles and parts, as well as recreational goods and vehicles. Spending on services edged higher (+0.25% m/m).
• With nominal spending growing at a similar pace to income, the personal savings rate held steady at 4.7% but is down a percentage point from April. 
• There was little change on the inflation front. Core PCE – the Fed's preferred inflation gauge – rose by 0.2%, on par with the pace seen over the previous two months. In annual terms, core PCE inflation was up 2.8% year-over-year, down slightly from the 2.9% pace in August.

Key Implications

• Today's data indicate that both consumer spending and income growth slowed to close out an otherwise strong quarter. Inflation-adjusted spending grew by 2.7% annualized in Q3 – up slightly from 2.5% in Q2.  However, September's weaker performance, combined with the recent pullback in consumer confidence metrics and softening labor market, suggest spending is likely to slow to a sub-1% pace in Q4. 
• Although the Fed's preferred inflation measure remains above its target, it has not accelerated and has stayed relatively stable over the past five months. Softer spending momentum and steady inflation should provide further reassurance to the Fed, solidifying the case for another quarter-point rate cut at next week's FOMC meeting.