Spending, Income Up Slightly
Consumers held spending in check in September and diverted some of their higher earnings into savings, the government said Thursday, adding to signs that slow but steady economic growth lies ahead.
The report reflects sluggish consumer spending for the third quarter, which contributed to slower economic growth in the period, as reported on Wednesday.
Analysts said consumer spending is likely to pick up in the current quarter--leading to a reasonably strong Christmas sales season--but that the economy overall will probably remain in low gear.
Consumer spending on goods and services rose a scant 0.1% to a seasonally adjusted annual rate of $5.18 trillion in September, after a 0.5% gain in August, the Commerce Department said.
Incomes from wages, salaries and other sources grew 0.6% to a $6.54 trillion rate after a 0.5% rise in August.
“I view the September slowdown in consumer spending primarily as a sign that the consumer was taking somewhat of a breather,” said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla. “But the support is present for a pickup in the fourth quarter.”
Reaser said high levels of consumer confidence, strength in the stock market and solid increases in earnings will lead to rising consumer spending in the current quarter.
The department reported on Wednesday that economic growth slowed to a 2.2% rate in the third quarter, from a 4.7% rate in the second quarter, in large part because consumer spending had slowed to a near-standstill.
In its report Thursday, the department said savings jumped to 5.7 cents out of each dollar earned in September, from 5.2 cents in August, the strongest savings rate since December 1993, when it was 6.3 cents.
Other reports issued Thursday also point to strong labor markets, which should prop up wages and fuel consumer spending, analysts said.
The Labor Department said the number of people filing new claims for unemployment compensation rose by 26,000 to 342,000 last week, but that those figures are inflated by layoffs in the automobile industry related to a strike against General Motors Corp. in Canada. That strike ended Oct. 24.
The average rate of new claims over the last four weeks--which smooths fluctuations in the more-volatile weekly numbers--rose just slightly to 331,250 from 331,000 in the previous four-week period.
The U.S. Chamber of Commerce said Thursday that its survey of 6,000 member companies showed less optimism in October about economic growth, sales and hiring.
Its business confidence index dipped to 53.5 in October from 54.8 in August, the previous month surveyed.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Personal Income
Seasonally adjusted annual rate, trillions of dollars:
Sept. 1996: $6.54
Source Commerce Department
Personal Spending
Seasonally adjusted annual rate, trillions of dollars:
Sept. 1996: $5.18
Source Commerce Department
