US consumer spending increased solidly in October, suggesting that the economy maintained its strong pace of growth early in the fourth quarter, but progress lowering inflation appears to have stalled in the past months.

Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.4 per cent last month after an upwardly revised 0.6 per cent advance in September, the Commerce Department’s Bureau of Economic Analysis reported.

Economists polled by Reuters had forecast consumer spending gaining 0.3 per cent after a previously reported 0.5 per cent increase in September.

The Atlanta Federal Reserve is currently estimating gross domestic product rising at a 2.6 per cent annualized rate this quarter. The economy grew at a 2.8 per cent pace in the July-September quarter.

Consumption is being largely underpinned by low layoffs, with additional help from strong household balance sheets thanks to a stock market rally and high home prices.

Household savings also remain lofty. Economists are generally anticipating a fairly decent holiday shopping season, though still-high prices are squeezing budgets.

Though inflation is cooling, there appears to not have been much progress in recent months bringing it down to the Federal Reserve’s 2 per cent target.

The personal consumption expenditures (PCE) price index climbed 0.2 per cent in October, matching September’s unrevised gain. In the 12 months through October, the PCE price index increased 2.3 after advancing 2.1 per cent in September.

Excluding the volatile food and energy components, the PCE price index rose 0.3 per cent, after a similar increase in September.

In the 12 months through October, core inflation increased 2.8 per cent after climbing 2.7 per cent in September. The US central bank tracks the PCE price measures for monetary policy.

There are concerns that inflation could rise next year if President-elect Donald Trump pushes ahead with some of his campaign promises, including raising tariffs on imported goods, and narrow the path for interest rate cuts next year.

Trump said he would impose a 25 per cent tariff on all products from Mexico and Canada, and an additional 10 per cent tariff on goods from China, on his first day in office.

The Fed reduced rates by 25 basis points earlier this month, lowering its benchmark overnight interest rate to the 4.50 per cent-4.75 per cent range.

It kicked off its policy easing cycle in September, its first reduction in borrowing costs since 2020, after hiking rates by 525 basis points in 2022 and 2023 to quell inflation.