Factory Orders Inch Up a Notch in September : Economy: The government said the gain was artificially skewed by higher energy costs. Personal income declined the same month.
Rising energy prices sapped Americans’ incomes during September and artificially boosted factory orders, the Commerce Department reported Wednesday, setting the stage for sharply reduced business activity in coming months.
In its report, the Commerce Department said that after adjusting for inflation, personal income fell 0.3% last month while orders received by factories inched up 0.1%.
The scant rise occurred only because price increases at petroleum refining companies lifted the figure.
Excluding petroleum, factory orders dropped 1.1% in September, the department said.
The reports suggest that inflation triggered by soaring energy costs since Iraq’s Aug. 2 invasion of Kuwait was taking a heavy toll on the industrial economy.
Consumer spending in September rose 1.1% to a seasonally adjusted annual rate of $3.73 trillion, more than twice the 0.5% rise in August.
But that was also largely the result of inflationary price rises. Adjusting for the effect of price rises, September spending was only 0.3% higher than August.
“I think we’re clearly going to see consumers pulling back in the fourth quarter, and I think Christmas sales are in jeopardy at this point unless we get a resolution in the Middle East,” said Lynn Reaser, senior economist with First Interstate Bancorp in Los Angeles.
Consumers fuel about two-thirds of the nation’s economic activity by buying goods and services, so any sign of pressure on their finances is an early warning of trouble ahead.
“The consumer is on borrowed time,” said Robert Dederick, an economist at Northern Trust Co. in Chicago.
The intensity of the squeeze was seen in the drop in personal savings to a rate of only 3.5% in September, the lowest in nearly three years.
The savings rate--the percentage of wages or salaries people manage to save instead of spend--was down from 4.1% in August and 4.4% in July.
