Americans abruptly cut spending last month, raising doubts about the economy’s ability to maintain the sturdy growth of the summer.
The Wall Street Journal reported that overall household spending fell 0.2% from August, the first decline since January and only the third since the recession ended in mid-2009, the Commerce Department said Friday. The drop reflected a big decline in purchases of big-ticket items such as cars.
Americans’ overall income—including money from wages, investments and government aid — climbed 0.2%, the smallest increase of the year.
Economists surveyed by The Wall Street Journal had predicted a 0.1% rise in consumer spending and a 0.3% increase in income.
The report offered red flags on the economy’s strength just a day after a strong reading on third-quarter economic growth. The government reported Thursday that gross domestic product grew at a 3.5% annual rate in July through September, but Friday’s report suggests the economy softened heading into the fourth quarter.
“The monthly pattern points to a deceleration in spending momentum,” TD Economics economist Andrew Labelle said in a note to clients, adding that weak income growth also remains a concern. “We remain confident that a tightening labor market will eventually lead to faster income growth, but clearly this has yet to manifest itself, and may take several more months to occur.”
For the full story click here.