Higher prices push up consumer spending at the expense of savings
Americans spent more in August than the month before, buying more cars and paying up for gas. But many funded their expenditures by raiding their savings accounts.
Consumer spending, a major contributor to the country’s economic activity, increased 0.5%, or $57.2 billion, to a total of $11.2 trillion. The gauge had risen 0.4% in July, according to the Commerce Department.
But personal income only grew 0.1%, the same amount as in July. The savings rate slipped to 3.7% of after-tax income after reaching 4.1% the previous month.
The price of gas has risen steadily since July after sliding through the spring, according to the AAA Fuel Gauge report. A gallon of regular unleaded now costs an average of $3.79, compared to $3.47 a year ago.
Food expenses, amplified by the summer drought, are expected to continue soaring. A British trade group recently said that a worldwide shortage of pork next year is unavoidable, likely leading to surging prices for the meat.
After adjusting for inflation, consumer spending appeared to have barely budged.
The so-called real measure was up just 0.1%, even as Americans spent 0.5% more on durable goods such as vehicles and large appliances. Expenditures on nondurable items, such as fuel and food, got a 0.3% real boost.
Post-tax disposable income was down 0.3%.
High prices aside, consumers are also being weighed down by a sluggish job market and concerns about the looming “fiscal cliff.” Though making promising moves, real estate indicators are still unpredictable. And households are increasingly burdened with student loans.
Still, consumer confidence hit a four-month high in September, according to a new report issued Friday by Thomson Reuters and the University of Michigan.
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