Americans spent less in October for the first time since May. Personal spending declined 0.2 percent in October, pulling back from the 0.8 percent growth in purchases in September. The Bureau of Economic Analysis attributes at least some of the decline to Hurricane Sandy. Even with the weaker spending for the month, the year-over-year change in personal consumption was 3.1 percent, easing from the 3.5 percent pace the month before.
The decrease in spending was larger for durable goods, down 1.9 percent. Nondurable goods purchases fell 0.2 percent, and individuals spent 0.1 percent more on services.
At the same time, personal income was unchanged. Manufacturing wages and salaries declined from $748.6 billion to $746.5 billion, erasing the gains seen in September. Overall, personal income has risen 3.1 percent over the past 12 months, matching the growth in spending.
With personal spending falling and income growth flat, the savings rate rose from 3.3 percent to 3.4 percent. Still, the larger trend has a downward trend in the savings rate, which was 4.1 percent in June.
More recent data suggest that retail spending has picked up since then, with decent holiday spending growth as reported by the National Retail Federation. Consumers appear to not be reacting as of yet to the possibility of the fiscal cliff, with consumer confidence actually rising. That could change, though, with increased coverage of the cliff and with individuals contemplating the possible impact of higher taxes and reduced economic output on their spending patterns.
Chad Moutray is chief economist, National Association of Manufacturers.