Inflation absorbed almost all of United States consumers’ September spending increase, leaving households paying more for barely any additional goods and services.

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The monthly result complicates the stronger growth picture in the third-quarter GDP estimate that the Bureau of Economic Analysis announced Thursday (Oct. 29). The economy expanded at a 3.4% annualized rate, up from 2.2% in the second quarter, with consumer spending contributing to growth. Yet the quarter ended with little improvement in consumption after accounting for prices.

The quarterly inflation figures showed relief. The personal consumption expenditures price index rose at a 2.1% annualized rate, down from 5% in the second quarter. Excluding food and energy, the rate slowed to 2.5% from 3.3%.

September’s reading on the PCE price index showed prices 3.6% higher than a year earlier, compared with August’s 3.4%. A slower quarterly inflation rate and a higher September year-over-year reading measure different periods; neither cancels out the other.

The immediate squeeze appears in September’s income and spending figures. Consumer spending increased 0.5% from August in current dollars, while prices also rose 0.5%. Inflation-adjusted spending increased less than 0.1%. Disposable income rose 0.2% before inflation but fell 0.3% after it.

Households collectively spent more while their after-tax purchasing power declined. For payments businesses and merchants, higher dollar volumes alone wouldn’t establish that customers are buying more. September’s consumption figures show how closely spending growth can track the cost of maintaining purchases.

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