US consumer spending fell at its fastest pace in more than 14 years in September as Americans clamped their wallets closed in the wake of the September 11th attacks, the US government said today.
Consumer spending plunged 1.8 per cent in September to an annual rate of $7 trillion, following a 0.3 per cent gain in the previous month, the US Commerce Department said.
The data was far worse than estimated by Wall Street economists, who on average estimated consumer spending fell 0.9 per cent in September.
It was the first decline in spending since May 1999 and was the biggest drop since January 1987, when spending also fell 1.8 per cent.
US consumers cut spending in September on a broad range of items. Spending on durable goods, items like cars and household appliances intended to last for several years or longer, plunged 3.2 per cent following a 0.3 per cent decline in August.
Spending on services fell 1.8 per cent in September - the biggest drop on record - after rising 0.5 per cent in the prior month while non durable outlays declined 1.3 per cent following a 0.3 per cent gain in August.
Economists keep a close eye on consumer spending as it accounts for two-thirds of US economic activity. Consumer spending largely kept the weak US economy afloat prior to the September 11th attacks, but consumers cut back sharply on their spending in the days immediately following the attacks on the World Trade Center and on the Pentagon.