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Oct. 30 (Bloomberg) — Spending by U.S. consumers fell in September for the first time in five months after the government’s auto-rebate program expired.
The 0.5 percent decrease in purchases matched the median estimate of economists surveyed by Bloomberg News and followed a 1.4 percent jump in the prior month, Commerce Department figures showed today in Washington. Incomes were unchanged, while the savings rate climbed.
Stagnant wages and concern over mounting unemployment are causing confidence to wane, raising the risk that consumers will retrench in coming months as government assistance programs run out. The report also showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rates low.
“The consumer went out spending in August, but once that incentive was taken away they didn’t have the same reason to spend as much,” said Jonathan Basile, an economist at Credit Suisse in New York, which accurately forecast the decline in personal spending. “Consumers are going to be selective and not necessarily aggressive going into the holiday season.”
Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index was down 0.4 percent to 1,057.30 at 8:46 a.m. in New York. Treasury securities rose, pushing the yield on the 10-year note down to 3.45 percent from 3.50 percent late yesterday.
The median forecast for spending reflected responses from 75 economists surveyed. Projections ranged from a decline of 0.9 percent to a gain of 0.5 percent. The government revised the August reading up from an originally reported increase of 1.3 percent.
Wages, Salaries
Wages and salaries dropped 0.2 percent after a 0.2 percent gain the prior month as job losses mounted.
Employment expenses rose 0.4 percent in the third quarter and wages had the smallest 12-month gain since 1982, figures from the Labor Department also showed today. The increase in the employment-cost index was the same as the gain in the second quarter and followed a 0.3 percent increase in the first quarter was the smallest since records began in 1996.
Fed policy makers, who have said they’d keep the benchmark lending rate near zero “for an extended period,” are trying to secure an economic recovery alongside an eventual withdrawal of fiscal and monetary stimulus in time to avoid driving inflation and borrowing costs higher.
Today’s report showed inflation held below the Fed’s long- term forecasts. The price gauge tied to spending patterns fell 0.5 percent from September 2008.
Price Measure
The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent from the previous month and was up 1.3 percent from a year earlier, matching the 12-month gain in August that was the smallest since 2001.
Adjusted for inflation, spending dropped 0.6 percent following a 1 percent increase in August.
The decrease in spending pushed the savings rate up to 3.3 percent last month from 2.8 percent.
Disposable income, or the money left over after taxes, was unchanged after rising 0.1 percent the previous month. Adjusted for inflation, disposable income dropped 0.1 percent.
Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, fell 7.2 percent last month after increasing 6.7 percent in the prior month.
Auto Sales
Autos in October probably sold at a 9.85 million pace, down from an average 11.5 million rate in the third quarter than reflected the boost from ‘cars-for-clunkers,’ according to the median estimate of analysts surveyed by Bloomberg News. Purchases averaged 13.15 million in 2008.
Consumer purchases of non-durable goods increased 0.5 percent, and spending on services, which account for almost 60 percent of all outlays, rose 0.1 percent.
Kellogg Co., the largest U.S. breakfast-cereal maker, yesterday reported third-quarter profit that exceeded analysts’ estimates as costs fell more than sales.
“Consumers remain nervous and are more value conscious than they were a couple of years ago,” Chief Executive Officer David Mackay said in a telephone interview. “We have to be pragmatic about consumers and the issues and pressures they face, and try to help them in any way we can.”
To contact the reporter on this story: Timothy R. Homan in Washington at [email protected]
Last Updated: October 30, 2009 08:50 EDT
By Timothy R. Homan
Source: Bloomberg