Consumers Keep Spending, Undeterred by Inflation

When the U.S. Bureau of Economic Analysis released its first estimate of third-quarter GDP at the end of last month, consumer spending, by far the largest component of the gross domestic product, once again proved to be surprisingly resilient in the face of surging inflation. According to the BEA, inflation-adjusted personal consumption expenditures increased at an annual rate of 1.4 percent in the third quarter, partially offsetting an 8.5 percent decline in gross private domestic investment. Measured in chained 2012 dollars, real personal consumption expenditures amounted to $14.1 trillion on an annualized basis in Q3 2022, up from $13.9 trillion a year earlier.

While consumers kept spending despite rising prices through the third quarter, there are some warning signs as spending on goods, led by food and beverages, gasoline and motor vehicles, declined for the third consecutive quarter. Meanwhile services spending increased at an annual rate of 2.8 percent in Q3, as Americans spent more on food services and accommodation, health care and transportation compared to the preceding quarter.