Consumer Spending Drops in September

Washington, DC, Oct. 30, 2009--Consumer spending fell sharply in September after the government's auto subsidy program ended, while after-tax incomes fell for the fourth month in a row, the Commerce Department said.

Inflation adjusted consumer spending dropped 0.6% in September after a 1% gain in August, the government said. It was the largest decline in spending since December.

Disposable incomes after taxes fell a seasonally adjusted 0.1%, the fourth decline in a row.

Despite overall growth in the economy in the third quarter, incomes aren't growing and jobs are still being lost at a rapid pace.

In a separate report, the Labor Department said employment costs rose 0.4% in the third quarter and were up just 1.5% in the past year, the slowest growth on record.

Meanwhile, the Commerce Department said current-dollar (not inflation-adjusted), spending fell 0.5% in September after a 1.4% gain in August.

With spending falling faster than incomes, the personal savings rate rose to 3.3% of disposable income from 2.8% in August.

Inflation was mild. Consumer prices rose 0.1% and core prices (which exclude food and energy) also rose 0.1%. In the past year, consumer prices are down 0.5%, while core prices are up 1.3%.

The decline in spending in September was largely due to the end of the government's subsidy program for autos.

Real spending on durable goods (including autos) fell 7.2% in September after a 6.7% increase in August. Still, the level of spending on durable goods in September was higher than in July.

Real spending on nondurable goods rose 0.5% after a 0.9% gain in August. Real spending on services increased 0.1% after a 0.2% increase in August.