US consumer spending down 0.2 percent in September

Staff Writer
Columbus CEO

WASHINGTON (AP) — U.S. consumer spending fell in September, the first decline in eight months, as shoppers took a breather after a big spending spree in August. Income growth posted the slowest gain this year.

Consumer spending dropped 0.2 percent in September, the Commerce Department reported Friday, the weakest performance since a similar 0.2 percent decline in January. Income edged up 0.2 percent in September, the smallest monthly gain since a flat reading last December.

The spending decline followed a big 0.5 percent increase in August. In September demand fell for durable goods such as autos and for nondurable goods, a retreat that partially reflected falling prices for gasoline.

Spending is closely watched because it accounts for 70 percent of economic activity. Economists believe September's downturn was temporary, as a strengthening job market pushes up spending and the overall economy in coming months.

Since the recession ended in June 2009, spending has only fallen three times.

In September, spending on durable goods such as autos dropped a sizable 2 percent, after a 2.1 percent jump in August. Spending on nondurable goods such as clothing, food and gasoline, was down 0.3 percent, while spending on services such as doctor's visits and utilities posted a modest 0.2 percent rise.

The small rise in income and the decline in spending resulted in a slight increase of the saving rate.

Savings as a percentage of after-tax income rose to 5.6 percent in September, up from 5.4 percent in August. The saving rate averaged 4.9 percent in 2013, down from 7.2 percent in 2012. That had been the highest level in nearly two decades as Americans worked to boost savings following the 2007-2009 downturn.

Inflation as measured by a gauge tied to consumer spending edged up a slight 0.1 percent in September, with prices up just 1.4 percent over the last 12 months. That is well below the 2 percent target for annual price increases which the Federal Reserve considers an optimal level for inflation.

Some of the recent slowdown in inflation reflects tumbling gas prices. The declines in pump prices are a major reason economists are optimistic about consumer spending in the coming months. Lower prices at the pump mean consumers will have more to spend on other items.

Another reason for optimism is continued strong job growth, which pushed the unemployment rate down to a six-year low of 5.9 percent in September. More people working means higher incomes and more fuel to drive consumer spending.

The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.5 percent in the July-September quarter.

Economists believe growth will come in around 3 percent in the current quarter, helped by solid consumer spending. They are also forecasting 3-percent growth in 2015, which would be the strongest level since 2005, two years before the start of the Great Recession.