Consumers spent slightly more last month but earned less for the first time in nearly two years. The new data on spending and incomes suggest Americans tapped their savings to cope with steep gas prices and a weaker economy.
Consumer spending rose 0.2% in August after a revised 0.7% increase in July, the Commerce Department reports today. Incomes fell 0.1%. That’s the poorest showing since a similar 0.1% drop in October 2009. Americans also squirreled less money away, with the savings rate falling to its lowest level since late 2009. Analysts are concerned a decline in income growth could further slow the economy if it causes households to cut back on spending. Consumer spending accounts for 70% of economic activity. The economy grew at an annual rate of just 0.9% in the first six months of the year, the slowest growth since the recession officially ended more than two years ago. Economists expect only slightly better growth in the second half of this year, based on expectations that consumers will spend more. Some are predicting growth of around 2% in the second half of the year. That level of growth would ease recession fears but wouldn’t be enough to lower the unemployment rate, which was 9.2% in August.
