September spending and income growth both slowed down while prices kept going up

As midterms loom for next week, we got the last big nationwide economic report on Thursday, with the release of September's income and spending report, along with related inflation news. And not surprisingly, prices rose more in that month, as a gallon of gas reached its highest cost since May.

Inflation accelerated in September as consumers paid more for gasoline and other goods, supporting economists' expectations of an interest rate increase from the Federal Reserve in December.

The Personal Consumption Expenditures Price Index climbed 0.5% last month after an unrevised 0.3% rise in August, the Commerce Department's Bureau of Economic Analysis said on Thursday, Oct. 29. The increase was in line with economists' expectations. In the 12 months through September, PCE inflation advanced 3.6% after an unrevised 3.4% rise in August.

And American consumers cut back last month, not spending any more than that higher rate of inflation.

Higher prices inflated consumer spending numbers in September. Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.5% last month after an unrevised 0.9% increase in August, the BEA said.

When adjusted for inflation, consumer spending was unchanged last month, heading into the fourth quarter on a weaker growth trajectory. Spending increased at a 3.8% rate in the July-September quarter.

Even worse, incomes only rose by 0.2% in September, well below inflation. And it continues a trend of subpar income growth that started in June.

In addition, income from work has had the smallest increases in back-to-back quarters since at least 2024, even as inflation was rising at the same time.

Those numbers also mean that inflation-adjusted income per capita in America has barely grown since January, and growth in this statistic has significantly slowed down after a strong recovery in the second half of 2022 and all of 2023.

So while the US economy and consumer spending might have grown well for it's overall level in Q3 2026 (as illustrated by 3.4% GDP growth with 3/4 of that growth being from consumer spending), it didn't end the quarter well, with income growth and consumer spending slowing while inflation went up. And when the artificial stimulus of election-related spending goes away after next week, how much is growth going to continue going forward?