Consumer spending pressured as clunkers program ends

October 30, 1:38 PMEconomy ExaminerCharles Sherry

Previous Next

Comment Print Email RSS Subscribe

Subscribe

Get alerts when there is a new article from the Economy Examiner. Read Examiner.com's terms of use.

Email Address   Include other special offers from Examiner.com Terms of Use

(AP Photo/Seth Perlman)

Consumer spending fell 0.5% in September after the cash for clunkers program that boosted outlays in August came to an end.

Durable goods, which include automobiles, took a big hit, dropping 7.0%, but a 0.7% rise in spending on nondurables helped to minimize the damage done by the end of the government's auto program.

Moreover, the rise in spending for nondurable items,which can be volatile month to month, suggests that consumers may be coming a little more optimistic about the economy.

Personal income, however, was unchanged last month, and we are likely to see lackluster growth in income until job growth starts to pick up.  And job growth is the key to a sustained increase in spending. Nonetheless, the days of easy credit are gone, and consumers will likely remain gun shy at the nation's malls as the emphasis on debt repayment and savings preempts major outlays. 

Because consumer spending makes up 70% of GDP, growth over the next 12-18 months is likely to be subdued unless other areas of the economy, such as housing or exports, take off.