Growth in consumer spending decelerated in October but income spiked
Wednesday, November 23, 2011
Consumption growth slowed in October and income experienced the largest monthly increase since March.
Data released by the Commerce Department on November 23 indicates that consumer spending rose 0.1 percent during the period. This was the smallest rise in four months, and followed an increase of 0.7 percent in September, according to The Associated Press. Spending on nondurable goods fell, while expenditure on durable goods such as automobiles experienced a strong increase.
A report on durable goods indicated that orders excluding transportation equipment such as airplanes rose 0.7 percent during the period after gaining 0.6 percent the prior month, Bloomberg reports. Orders for non-defense capital goods excluding aircraft plunged 1.8 percent after rising 0.9 percent the previous month. Shipments of non-defense capital goods aside from aircraft fell 1.1 percent after dropping 1 percent the previous month.
"Today’s report was a good reminder that much of what consumers spend their money is not purchased at the shopping mall, but is rather spent on their homes and on their health," James Marple, senior economist at TD Economics, told The Associated Press. "With services spending making up 65 percent of total consumption expenditures, the poor performance here more than made up for the continued gains in spending on goods."
An income and spending report released on the same day as the spending data indicated wages and salaries rose 0.5 percent, Bloomberg reports. The savings rate also rose to 3.5 percent in October from 3.3 percent in September.
Weak consumer confidence and unemployment that hovers close to 9 percent has been credited with causing this weak spending, the media outlet reports. Debt problems in Europe could potentially undermine the region's recovery and dampen demand for goods produced by U.S. manufacturers.
During the week that ended November 20, The Bloomberg Consumer Comfort Index was at minus 50.1, compared with having a reading of minus 50 the previous week. For all but one of the last 10 weeks, the reading has been at minus 50 or less. While 23 percent of respondents described their financial state as being "poor," 35 percent said that it was a less-than-ideal time for them to purchase goods and services. Performance this poor has never been experienced in the index's 26-year history.
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