Consumer spending in the U.S. slowed in August as incomes dropped for the first time in nearly two years.
Purchases rose just 0.2% in August after climbing 0.7% in July, according to a Commerce Department report issued this morning in Washington. A 0.2% advance in prices offset the gain in nominal, or unadjusted, spending. Meanwhile, incomes fell 0.1% in their first monthly decline since October 2009.
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The Commerce Department’s report also downwardly revises the July spending figure from a previously reported 0.8% gain.
“[Consumers] have a sour assessment of economic conditions and they are facing a lot of uncertainty about future earnings and employment prospects, and because of that there is a degree of hesitancy with respect to big ticket purchases,” said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities Inc.
The savings rate fell to 4.5% in August, down from 4.7% in July to its lowest level since December 2009.
The Federal Reserve’s preferred price gauge, which excludes volatile food and fuel costs, rose just 0.1% in August, the smallest increase since March.
Earlier this month, the Commerce Department reported that retail sales, an earlier gauge of household spending, stagnated in August. A Labor Department report had the jobless rate holding at 9.1% last month, while average hourly earnings fell for the first time in more than three years.
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The overall drop in wealth is constraining consumer spending on big ticket items and non-essentials. Vehicles sales, for instance, came in at a 12.1 million seasonally adjusted annual rate last month, down 100,000 cars from the previous month.