September Spending Spree Across Country
Consumer spending increased by .5% in September, as incomes also rose and the economic outlook improved around the nation. According to the Commerce Department, the market is holding up surprisingly well, despite the effects of Hurricanes Katrina and Rita. This recent rise in spending following a dip in August of the same percentage.
Americans’ incomes, meanwhile, increased by 1.7% in September, the largest gain since December 2004. That marked an improvement from the 0.9 percent plunge in incomes in August — a decline that mainly reflected fallout from Katrina.
While the marketis surviving the storms, they still had major effects. Uninsured losses to residential and business property reduced incomes by about $5 billion on an annualized basis in September and by about $240 billion, annualized, in August, the government estimated. Spending growth for September matched economists’ expectations, but the increase in income was larger than forecast.
In-depth Consumer Spending
So what are these numbers reflective of? Despite the sting of high energy bills, consumers spent briskly in the third quarter, helping the economy grow by a 3.8 %annual rate, the government reported last week. Consumer spending in the July-to-September quarter reflected a big appetite for big-ticket durable goods, such as cars, which had been discounted and promoted to lure buyers.
Consumer spending should slow down in the final three months of this year, as auto sales drop off with the waning of generous incentives and energy prices cause belt-tightening. Analysts are predicting that any moderation in consumer spending, however, will be more than offset by stronger spending elsewhere, which should allow the economy to grow at a solid pace in the current October-to-December period.
Despite the solid spending last month and the continually strong home sales, consumer confidence in the economy has been plummeting, as people are growing anxious about President Bush’s economic leadership. The public’s perception has been shaped by the following:
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High energy bills
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The hurricanes and job losses wracked up from the disasters
To combat inflation, the Federal Reserve is expected to boost interest rates by another quarter-point on Tuesday, the 12th increase of that size since June 2004.
