The Bureau of Economic Analysis said that personal spending rose 0.8 percent in September. This builds on the 0.4 percent and 0.5 percent gains observed in July and August, respectively. Indeed, as reported last week, Americans have resumed their purchases of late, with consumption accounting for roughly half of the growth in real GDP in the third quarter (July to September).
This was good news for manufacturers, with these increases in spending resulting in 6.3 percent more purchases of goods in the third quarter. In September alone, individuals consumed 1.1 percent more durable goods and 1.7 percent more nondurables.
Personal income was also higher in September, up 0.4 percent. However, when adjusted for inflation, disposable income was flat. The main driver of higher prices in September was increased energy costs (up 4.8 percent). Nonetheless, manufacturing wages and salaries edged slightly higher, up from $725.7 billion to $726.2 billion. Despite the monthly increase, this is below the $732.0 billion seen in July, which reflects recent weaknesses in the global and U.S. marketplace in the sector.
With personal spending outstripping personal income growth, the savings rate fell from 3.7 percent to 3.3 percent. This is the third month in a row that the savings rate has fallen, as it stood at 4.4 percent in June. This lines up perfectly with the increase in spending noted in the third quarter, suggesting that Americans have supplemented their higher incomes by dipping into savings.
Chad Moutray is chief economist at the National Association of Manufacturers.