US consumer spending rose only slightly in September, signalling weaker momentum at the end of the third quarter as a sluggish labour market and higher living costs curbed demand, reported Reuters.

The Commerce Department's Bureau of Economic Analysis said spending, which accounts for more than two-thirds of economic activity, increased 0.3 per cent after a downwardly revised 0.5 per cent gain in August. Economists had forecast a 0.3 per cent rise. The report was delayed by a record 43-day government shutdown.

The slowdown followed three months of solid gains, driven largely by high-income households benefiting from a stock market rally. Economists said middle- and lower-income households were squeezed by labour market stagnation and US tariffs, creating what they described as a K-shaped economy.

Goldman Sachs analysts warned weak income growth and cuts to government assistance programmes such as Medicaid and food stamps could weigh on low-income spending in 2026.

Despite September's moderation, consumer spending likely grew strongly in the third quarter. The Atlanta Federal Reserve estimated GDP expanded at a 3.8 per cent annualised rate in July-September, matching the second quarter. The BEA will release its delayed GDP estimate on 23 December.

The Personal Consumption Expenditures Price Index rose 0.3 per cent in September, bringing annual inflation to 2.8 per cent. Core inflation also stood at 2.8 per cent. Markets have already priced in a 25-basis-points rate cut by the Federal Reserve next week.