U.S. Sept. Personal Spending Falls as Auto Sales Slow (Update1)
Oct. 31 (Bloomberg) -- U.S. personal spending declined in September for the first time in a year as auto sales dropped from a near-record pace, a government report showed.
Consumer purchases fell 0.3 percent last month, following a revised 1.1 percent rise in August, the Commerce Department said in Washington. Incomes increased 0.3 percent, matching the revised gain for the month before. Disposable income, or the money left after taxes, dropped 1 percent as tax refunds wound down, after climbing 1 percent in August.
``The decline in the spending number was driven by auto sales, but the bigger focus will be the decline in disposable income that came from the benefits of the tax cuts washing out,'' said John Shin, an economist at Lehman Brothers Inc. in New York. ``That's one of the reasons we're looking for softer growth in the fourth quarter.''
The U.S. economy expanded at a 7.2 percent annual rate from July through September, the fastest in almost two decades, the Commerce Department said yesterday. Consumer spending, which accounts for 70 percent of the economy, grew at a 6.6 percent pace, the fastest since the third quarter of 1997.
Economists had forecast a 0.1 percent decline in spending after a previously reported rise of 0.8 percent in August, based on the median of 66 estimates in a Bloomberg News survey. Incomes were forecast to rise 0.2 percent, the same as previously reported for August.
Tax Refunds Slow
The drop in disposable income reflected a decline advance refund payments to taxpayers under this year's tax-cut legislation, the Commerce Department said. Personal tax and nontax payments rose $109.7 billion in September after falling $50.3 billion in August and $106.6 billion in July.
Purchases of durable goods including autos, furniture, and other long-lasting items, adjusted for inflation, dropped 4.6 percent in September after jumping 4 percent the month before.
Spending on non-durable goods fell 0.4 percent adjusted for inflation, following a rise of 0.8 percent in August. Spending on services, which account for almost 60 percent of all purchases, gained 0.2 percent after rising 0.1 percent in August.
The personal consumption expenditures price index, a measure of inflation watched by Federal Reserve Chairman Alan Greenspan, which is tied to spending, rose 0.2 percent last month and is up 2 percent over the past 12 months.
Excluding food and energy, the PCE price index gained 0.1 percent in August. The core PCE climbed 1.2 percent in the past 12 months.
Personal Savings
Spending adjusted for inflation, the figure used to calculate gross domestic product, dropped 0.6 percent after rising 0.8 percent in August.
The personal savings rate was 2.9 percent in September, down from 3.5 percent the prior month. The indicator weighs current income from wages, salaries, businesses and government payments against spending. It doesn't account for borrowed money, income from investments or withdrawals from prior savings.
U.S. Treasury securities rose after the report. The 4 1/4 percent note due in 2013 rose 1/8 to 99 12/32 at 8:49 a.m. in New York, pushing the yield down 2 basis points, or 0.02 percentage points, to 4.33 percent.
Cars and light trucks sold at a seasonally adjusted annualized rate of 16.7 million in September, down from 19 million in August, the fastest pace since October 2001.
Automakers have been using discounts and other incentives to attract customers. That has meant higher unit sales and slower revenue growth for some.
Auto Discounts
Ford Motor Co., the world's second-largest automaker behind General Motors Corp., led the industry with spending of $4,388 a vehicle on rebates and loan discounts in September, up 3 percent from August, according to CNW Marketing Research Inc.
Growth in gross domestic product may ease to 3.8 percent in the fourth quarter and through the first nine months of 2004, based on the median estimate of 58 economists surveyed by Bloomberg News Sept. 26 to Oct. 3.
Most of the third-quarter spending surge came in July in August, when many households received tax rebates or took cash out of home equity through mortgage refinancing at rates held close to record lows.
Retail purchases excluding those at auto dealers increased 0.3 percent to $244 billion in September, following a 1.2 percent gain in August, the Commerce Department said earlier this month. Including vehicles, sales fell 0.2 percent last month.
Companies may have to increase investment in equipment and production after the surge in third-quarter consumer demand drained inventories. That would help make up for any slowdown in consumer spending, said Peter Kretzmer, senior economist at Banc of America Securities.
Investment, Inventories
``The ability of the economy to maintain momentum will depend to a large extent on the pace of business investment spending, including inventory building,'' Kretzmer said.
Manpower Inc. Chief Executive Officer Jeffrey Joerres said companies are beginning to hire light-industrial and manufacturing workers. Milwaukee-based Manpower is the world's second-largest temporary-staffing company, behind Swiss-based Adecco SA.
``The job market is getting better,'' Joerres said in a televised interview with Bloomberg News. ``In the South and Midwest, we're seeing the strongest recovery in the U.S. in basic manufacturing, where inventories are very low.''
Last Updated: October 31, 2003 08:55 EST |
