The US consumer spending data for September showed an unexpected tightening of the purse strings of the Americans as their spending dropped for the first time in eight months amid slowing income growth, the Commerce Department report showed on Friday.
The consumer spending in the country dipped 0.2 percent after a surge of 0.5 percent in August. Meanwhile, the personal income showed the smallest rise since December with an increase of 0.2 percent in September. The incomes grew 0.3 percent in August.
The first time decline in consumer spending trend in eight months gave clear indications that the economy lost some amount of momentum while heading into the fourth quarter.
Both the figures were below the estimates of the analysts who have forecasted that consumer spending would slow in September but still tick up 0.1 percent and incomes would increase 0.3 percent. The economists, however, turned down the USD 19-billion decrease in consumer spending to USD 11.97 trillion in September, underlining that it came just after August’s big rise.
The consumer spending, along with monthly mortgage payments that are not the part of the Commerce Department figures, accounts for more than two-thirds of the economic activity of the United States.
Despite the dip in September’s spending rate, the experts believe that the faster wage growth and the rising consumer sentiment have clearly indicated that the weak spending pattern will be temporary and the country’s economy will remain on firm ground.
“The fundamentals … remain very solid. “The conditions are in place for continued above-trend growth,” said Gus Faucher, top economist at PNC Financial Services in Pittsburgh.
Another US Labor Department report showed salaries and wages increase 0.8 percent in the third quarter, the largest rise in over six years.
On Wednesday, the Fed policymakers had given a fairly upbeat assessment of the country’s labor market as they have dropped their characterization of US labor market slack as “significant” after closing the Federal Reserve Bank’s bond-buying stimulus program.