Monday, October 1, 2007

The Dark Side Of U.S. Consumer Spending

Despite increasingly grim economic news, American consumers continued spending in August. What was especially surprising was that they did so while earning less – a pattern that is not sustainable and that may reflect inflationary pressures in the U.S. economy.
The Commerce Department reported on Friday that personal income rose 0.3% last month, a decrease from the 0.5% rate in July, while consumer spending rose 0.6% in August. Spending was expected to increase 0.4%.
The report follows the shockingly weak monthly labor figures for August, which showed the U.S. economy shed 4,000 jobs, the largest loss since 2003. Loss of jobs should spell big trouble for consumer spending, an ill omen for the economy in general ahead of the holiday shopping season.

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