Con­sumers’ spend­ing picks up

1 per­cent growth in Septem­ber marks big­gest gain in eight years.

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - MARTIN CRUTSINGER

WASH­ING­TON — Con­sumers boosted their spend­ing by 1 per­cent in Septem­ber, the big­gest gain in eight years. The surge was fu­eled by ro­bust de­mand across sec­tors.

The sharp jump in con­sumer spend­ing fol­lowed a 0.1 per­cent gain in Au­gust and was the best show­ing since an in­crease of 1.3 per­cent in Au­gust 2009, the Com­merce De­part­ment re­ported Mon­day. In­come growth was also solid in Septem­ber, ris­ing by 0.4 per­cent as wages and salaries climbed.

Con­sumer spend­ing is closely mon­i­tored be­cause it ac­counts for 70 per­cent of eco­nomic ac­tiv­ity. The lat­est re­sult sug­gests that Amer­i­cans were feel­ing in­creas­ingly con­fi­dent about the econ­omy head­ing into the fi­nal quar­ter of the year.

That should sup­port solid growth in the fourth quar­ter. The over­all econ­omy, as mea­sured by gross do­mes­tic prod­uct, grew at a 3 per­cent an­nual rate in the July-Septem­ber quar­ter, de­spite the dev­as­ta­tion from two hur­ri­canes.

The surge in Septem­ber was led by a 14.7 per­cent in­crease in spend­ing for new mo­tor ve­hi­cles, as driv­ers be­gan re­plac­ing ve­hi­cles, es­ti­mated at more than 300,000, de­stroyed in the hur­ri­canes. Spend­ing on non­durable goods such as cloth­ing and ser­vices such as util­ity pay­ments was also strong.

“Con­sumers were not shy in Septem­ber,” said Eu­ge­nio Ale­man, se­nior econ­o­mist at Wells Fargo. “Ev­ery sec­tor of con­sump­tion was boom­ing.”

Con­sumer con­fi­dence has been bol­stered by a Wall Street rally, which has pushed stocks to new highs. Econ­o­mists ex­pect even stronger

spend­ing next year if Repub­li­cans are able to push their tax cut pack­age through Congress.

“Most house­holds should get the ben­e­fit of a re­duc­tion in taxes early in the New Year, but we won’t know what pro­por­tion of house­holds will be net ben­e­fi­cia­ries of the Repub­li­cans’ tax cuts un­til the de­tails of the plan are re­leased this Wed­nes­day,” said Paul Ash­worth, chief U.S. econ­o­mist for Cap­i­tal Eco­nom­ics.

A key in­fla­tion gauge closely fol­lowed by the Fed­eral Re­serve showed con­sumer prices rose 1.6 per­cent in Septem­ber com­pared with a year be­fore, up from read­ings

of 1.4 per­cent the pre­vi­ous three months.

Fed of­fi­cials, who have raised in­ter­est rates twice this year, will meet again to­day and Wed­nes­day. How­ever, an­a­lysts ex­pect them to de­fer a third rate in­crease in an ef­fort to en­sure that low in­fla­tion is ris­ing and an­nual price gains are again mov­ing to­ward the Fed’s 2 per­cent tar­get.

The 1.6 per­cent 12-month rise in prices was the strong­est gain since a 1.7 per­cent in­crease in April. Core in­fla­tion, which ex­cludes food and en­ergy, re­mained stuck at an in­crease of 1.3 per­cent over the pre­vi­ous 12 months, the same as in Au­gust.

The 1 per­cent jump in con­sumer spend­ing re­flected a 3.2 per­cent ad­vance in spend­ing on durable goods

such as au­tos. Auto sales were strong in Septem­ber, post­ing the first monthly gain of the year.

An­a­lysts said sales were helped by the pur­chases of re­place­ment ve­hi­cles af­ter the hur­ri­canes that hit Texas and Florida.

Sales of non­durable goods such as cloth­ing posted a 1.5 per­cent rise, while spend­ing on ser­vices such as util­ity bills and rent rose 0.5 per­cent.

With spend­ing so strong, the per­sonal sav­ing rate dropped to 3.1 per­cent of af­ter-tax in­come, down from 3.6 per­cent in Au­gust.

AP/DAVID ZALUBOWSKI

A car shop­per walks past a 2018 Sonata sit­ting amid an as­sort­ment of mod­els on the show­room floor of a Hyundai deal­er­ship in the south Den­ver suburb of Lit­tle­ton, Colo., in early Oc­to­ber.

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