Seeking Alpha
Profile| Send Message|
( followers)  

In a reversal of the economic trend over the past few months, US consumers spent less and saved more in September 2009 than in August 2009, according to the monthly Bureau of Economic Analysis Personal Income and Outlays report, which also revealed that consumer personal income and disposable personal income also dipped slightly.

US consumers’ personal consumption expenditures (PCE), which essentially reflect consumer spending, dropped $47.2 billion, or 0.5%. This decrease outpaced their’ personal income, which dropped $100 million, and disposable personal income (DPI), which dropped $200 million, with both figures declining less than 0.1%. DPI represents personal income less current personal taxes.

In contrast, all three of these statistics had risen in August, when personal income increased $17.4 billion (0.1%), DPI increased $14.1 billion, (0.1%), and PCE increased $139.8 billion (1.4%), based on revised estimates, writes Retailer Daily.

click to enlarge

A comparison with the September Advance Monthly Retail Trade Survey from the Census Bureau shows that US retail and food service sales fell 1.5%, from $351.4 billion to $344.7 billion. However, a 10.4% drop in sales at motor vehicle and parts dealers significantly outpaced any individual increases, which were mostly below 1%. Last month, motor vehicle and parts dealers reported a 10.6% increase which was likely spurred by the federal government’s now discontinued “Cash for Clunkers” incentive program.

Personal saving, which experienced severe declines of 34.5% in August, 10.4% in July and 26.3% in June, dramatically reversed course in September. Last month saw consumers increase their saving from $307 billion to $355.6 billion, a 15.8% increase. The sudden uptick in consumer saving may reflect falling consumer optimism about the near-term future of the economy, at least according to several consumer indices.

The October Consumer Confidence Index fell 5.7 percentage points, including a steep decline in the forward-looking Expectations Index. The Consumer Reports Index, which tracks consumer financial and employment numbers to obtain an overall sense of consumer health, climbed about two percentage points in October, but at 40.3 still stands well below 50, indicating continuing negative consumer sentiment regarding the economy.

Recent government data supports this finding, as consumer credit and borrowing rates have been dropping sharply, and the official unemployment rate (which only counts a fraction of the actual number of people out of work) has been creeping toward double digits. With credit and loans becoming increasingly difficult to obtain and job losses continuing to mount, consumers may be waking up to the fact that the spending and saving habits they followed during the summer of 2009 are not realistically sustainable in the long term.

Source: Personal Income Stats: More Save, Less Spend in Sept. 2009