Despite the fact that it rose for the second month in a row, this time by 0,1%, consumer spending is increasing with the speed of a snail. It looks like Americans have boosted savings and have spent less on utilities, cars and trucks, says Market Watch.
Wall Street expectations were higher than that 0,1% for consumer spending. Economists polled by MarketWatch had forecast a 0.3% increase, but Americans’ new spending habits surprised everyone. But some signs were there. Last month, the number of new cars and trucks sold reached a decade high so, logical, in October people spent less on autos. And the good weather also ruined some financial planes. Households spent less on electricity and home heating fuel due to the unseasonably warm weather, another reason why consumer spending was low in October, confirms the same source.
But there are other details retails couldn’t have predicted: the common American is getting more and more parsimonious. The U.S. savings rate leaped to a three-year high of 5.6%, as surveys suggest consumers are unlikely open their pockets during the holiday season unless they find good deals and discounts.
“Consumers are cautiously increasing their spending,” said Gus Faucher, senior economist at PNC Financial Services, quoted by Market Watch. Other sources say that consumers have saved money from lower gasoline prices over the past year.
While consumer spending is going down, incomes are rising. In October it rose with 0,4%. How is that possible? Well, an influx of new jobs over the past several years has driven the unemployment rate down to 5%, Therefore, more people with a job, more money in the family bag. Low inflation is also helping households stretch their dollars. Inflation, as gauged by the PCE price index, edged up 0.1% last month, says the same source.