Rebound in US consumer spending | Shanghai Daily

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November 26, 2009

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Rebound in US consumer spending

AMERICAN consumers got back in the buying mood in October as their incomes grew modestly, an encouraging sign for the budding economic recovery.

The Commerce Department reported yesterday that consumer spending rose a brisk 0.7 percent last month, following a pullback in September when spending plunged by 0.6 percent.

It was the best showing since a big 1.3-percent jump in August when the government's now-defunct Cash for Clunkers programs enticed people to buy cars.

The rebound in spending shows that consumers - who power 70 percent of national economic activity - are managing for now to hold up under the weight of some heavy negative forces.

The fear among Federal Reserve officials and other economists, though, is that the negative forces - rising unemployment and hard to get credit, which makes it difficult to finance big-ticket items such as homes, cars and appliances - will eventually cause consumers to turn more cautious in their spending in the months ahead, making for a lethargic recovery.

Still, yesterday's figures seemed to blunt fears that consumers could clam up, sending the country into a "double dip" recession, although there continues to be concern that consumer spending will slow early next year.

The increase in consumer spending in October was bigger than the 0.5-percent rise economists were forecasting.

Incomes, the fuel for future spending, rose 0.2 percent for the second straight month. The growth in incomes matched expectations.

With spending outpacing income growth, Americans' personal savings rate - savings as a percentage of after-tax income - dipped to 4.4 percent in October from 4.6 percent in September.

Consumers spent more on costly "durable" manufactured goods - such as cars and appliances - last month. Such spending rose 2.1 percent against an 8.5-percent drop in September. Non-durable spending on food and clothes also rose.




 

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