U.S. consumer spending rises in November; monthly inflation subsides

U.S. consumer spending rises in November, leading to fewer projected interest rate cuts by the Federal Reserve in 2025.

U.S. consumer spending increased in November, underscoring the economy's enduring strength, which prompted the Federal Reserve this week to project fewer interest rate cuts in 2025 than it had three months ago.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4% last month after a downwardly revised 0.3% gain in October, the Commerce Department's Bureau of Economic Analysis reported on Friday.

Economists polled by Reuters had forecast consumer spending advancing 0.5% after a previously reported 0.4% rise in October. Robust consumer spending helped to propel the economy to a 3.1% annualized growth rate in the third quarter after a 3.0% pace of expansion in the April-June quarter.

Economists are expecting only a modest slowdown in consumer spending this quarter after it surged at a 3.7% pace in the July-September quarter, the fastest in 1-1/2 years.

The Atlanta Federal Reserve is currently forecasting gross domestic product increasing at a 3.2% rate in the fourth quarter. Fed Chair Jerome Powell on Wednesday described the economy as having "just been remarkable," adding "I feel very good about ... the performance of the economy and we want to keep that going."

The U.S. central bank on Wednesday cut its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range. It forecast only two rate reductions in 2025, in a nod to the economy's continued resilience and still-high inflation.

In September, Fed officials had forecast four quarter-point rate cuts next year. The shallower rate cut path in the latest projections also reflected uncertainty over policies from President-elect Donald Trump's incoming administration, including tariffs on imported goods, tax cuts and mass deportations of undocumented immigrants, which economists have warned would be inflationary.