WASHINGTON Consumer spending rose faster than incomes in August for the second straight month, and the savings rate dropped to a record low, government figures showed Friday.
Spending on goods and services grew 0.6% in August, matching Julys increase, the Commerce Department said. Incomes rose 0.4% after gaining 0.3% a month earlier.
We have plenty of income to spend, and we are spending all of it and more, said Joel L. Naroff, president of Naroff Economic Advisors Inc. in Holland, Pa. It doesnt look as if consumers have put their wallets away.
Or at least their credit cards. Personal savings fell to an annual rate of negative 0.4% the lowest in 41 years of record-keeping. This suggests that Americans have stepped up their borrowing to buy and spent money at a faster-than-expected pace in the third quarter, even after a series of interest rate increases by the Federal Reserve.
Manufacturing in the industrial Midwest rebounded more than expected in September after declining the month before, a separate report showed.
The National Association of Purchasing Management-Chicago said its regional manufacturing index was 51.4 in September, up from 46.5 in August. More manufacturers reported paying more for raw materials than in August the prices-paid index rose to 66.7, from 58.6.
An overall reading of 50 or higher in the manufacturing index suggests growth, and the August reading had been the first to suggest a contraction since January 1999. The Fed has tried to cool demand by increasing rates six times since June 1999. Still, consumer credit rose by $9.4 billion in July, after a $14.7 billion increase in June that was the biggest in five months, Fed figures showed.
The Federal Open Market Committee is to meet Tuesday, and a survey of Wall Street dealers that trade directly with the Fed found they all expect the central bank to leave the overnight bank lending rate unchanged at 6.5%.