US consumer spending fell in September after four months of gains as a government programme to boost auto purchases ended, adding to fears that economic growth could stumble without government support.
The Commerce Department said today consumer spending fell 0.5 per cent, the largest decline since December, after a 1.4 per cent increase in August. The decline was in line with market expectations.
A separate report from the Labor Department showed employment costs in the United States rose 0.4 per cent in the third quarter, matching the previous period's increase and indicating marginal gains in income.
Government data yesterday showed the economy grew at a 3.5 per cent annual rate in the third quarter, probably ending a recession that began in December 2007.
With the labor market still too weak to support domestic demand, there are worries the economy's incipient recovery could stumble once the government support fades.
Consumer spending, which normally accounts for more than two-thirds of US economic activity, in August was bolstered by the popular "cash for clunkers" programme that gave discounts on some new motor vehicle purchases.
The programme, which ended in August, contributed to a jump in consumer spending in the third quarter and helped to pull the economy out of its worst recession since the 1930s.
Spending adjusted for inflation fell 0.6 per cent in September, also the largest decline since December, after rising 1 per cent the prior month, the Commerce Department said.
Personal income was flat last month after rising 0.1 per cent in August. That was also in line with market expectations. Real disposable income fell 0.1 per cent in September.
Despite the fall in income, Americans saved more money last month. Savings increased to an annual rate of $355.6 billion, lifting the saving rate to 3.3 per cent from 2.8 per cent in August.
Commerce Department data also showed the personal spending price index excluding food and energy, a key inflation gauge monitored by the US Federal Reserve, was up 1.3 per cent from a year ago in September, matching the August increase.
Federal Reserve policymakers, who have cut interest rates to almost zero to aid growth and have said they expect to keep rates exceptionally low for an extended period.
In the Labor Department report, the 1.5 per cent increase in compensation in the third quarter compared to the same period a year-ago, was the smallest on records dating back to 1982.
Increases in wages and salaries from year-ago levels, at 1.5 per cent, and benefits, at 1.6 per cent, were the lowest on record.
In the third quarter, compensation at state and local governments - many of which are facing yawning budget gaps -- was unchanged as wages and salaries fell 0.1 per cent.
That was the first time since the index began tracking state and local governments in 2001 that wages shrank, the department said.
Reuters