Consumer Spending Rebounds in October

Consumer spending in the U.S. rebounded in October which is believed to exhibit an increase in the economy’s resiliency at the end of this year. The Department of Commerce reported a 0.2 percent increase in spendings last month after a reported flat rate in September. According to Reuters, the income in October also showed an increase in 0.2 percent which is equal to the percent increase in consumer spending. The saving rate remained at the same 5 percent level.

Lower gas prices and the increasing strength of the labor market could support consumer spending which may also protect the U.S. economy from decreasing growth in China and Europe. Excluding food and energy prices, a 0.2 percent increase in the price levels has been reported.

These events are especially applicable in light of the holiday shopping season. According to Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, many consumers will be in a better financial situation and may be able to spend more. However, additional claims state that unemployment claims increased by 21,000 to 313,000 in the week of November 17th which the Labor Department attributes to a halt in labor market improvements. A recent consumer confidence report also revealed that many Americans believed that finding a job now proved to be harder compared to October. Many companies may be cutting on spendings as the year ends which is evident by decreasing business investments over the past few months.

The Department of Commerce also reported a 1.3 percent decrease in orders of “non-military durable goods” (such as household appliances and automobiles) last month. Additionally, purchases of non-durable goods (like gasoline and clothing) increased by 0.5 percent, according to Bloomberg. More claims state that wages and salaries have increased by 0.3 percent since last month. The money left over after taxes was also reported to have risen by 0.1 percent last month after adjustment for inflation. Chief Operating Officer Michael Madden said on a November 20th conference call:

The macro environment heading into the heart of the shopping season feels much like last year — an improving economy, but still a somewhat reluctant shopper. On balance, with stronger economic growth, lower energy prices and a slightly better job market, this holiday season has more going in its favor.”

Another report released recently showed the U.S. economy expanded more than estimated, with bigger gains in consumer spending and the strongest six-month growth rate in the past 10 years. According to the Commerce Department, the value of all goods and services produced also rose 3.9 percent annually.

Read more here – “Consumers Stay Within Means as U.S. Spending Matches Income,” (Victoria Stilwell, Bloomberg).

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Anna is a current student at The George Washington University in Washington, DC with a concentration in Marketing and Communication. She specializes in social media outreach and has experience working in government contracting.

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