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Friday, October 28, 2011

Consumer Spending Grows Despite Falling Real Income

Consumer spending growth outpaced personal income growth in September leading to a plunge in the savings rate. Personal income recovered slightly from its negative August reading, posting a weak growth of 0.1%. Accounting for a 0.2% increase in prices, real disposable income fell by 0.1%, its third consecutive decline.


Despite the fall in real disposable income consumers increased purchases by a strong 0.6% during the month. Spending growth was led by goods, particularly durable goods, as auto sales rebounded.

The combination of strong spending and weak income growth pushed the savings rate down to 3.6%, its lowest reading since 2007.

Inflation, as measured by the PCE deflator, was at its lowest level since June, at 0.2%. Any inflation was driven by food and energy as core prices failed to rise.

Read the report.

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