WASHINGTON Consumer spending had its largest gain in seven months in September, led by purchases of automobiles and higher-priced gasoline and aided by federal farm payments, government figures showed.
Even with the income boost that the farm payments afforded, the savings rate was once again negative, a sign that Americans are borrowing to propel the economic expansion that is poised to enter a record 10th year in April.
The personal savings rate was negative 0.1% after falling to a record low of negative 0.4% in August. That indicator weighs current income from wages, salaries, businesses, and government payments against spending.
An increase of 0.8% in personal outlays on goods and services last month followed a revised 0.5% gain in August, the Commerce Department said. Incomes rose 1.1% in September, the largest gain in almost a year, after a rise of 0.4% the month before.
While higher gasoline prices accounted for part of the spending gain, purchases of expensive, long-lasting goods such as automobiles surged. The sharp rise suggests that a string of interest rate increases by the Federal Reserve has had little effect on shoppers willingness to open their wallets.
As you get closer to the holiday season, the consumer doesnt show any signs of slowing whatsoever, said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York. The September spending increase was the largest since a 1.2% gain in February. The September increase in incomes was the largest since a rise of 1.3% in October 1999, also the result of farm subsidies.
President Clinton in June signed an election-year measure giving farmers $7.1 billion in aid to compensate for low grain and livestock prices. Of that, $5.5 billion was due to get to cotton and grain growers by Sept. 30. It was the third straight year of farm bailouts.
Adjusting for inflation, largely spurred by energy prices, spending rose 0.4% in September after rising 0.5% in August. Excluding farm payments, incomes rose 0.4%, the same as in August.
Spending on durable goods rose 1.5% in September, the biggest increase since 1.7% in February. It followed a rise of 0.6% in August. The government said this was largely because of sales of automobiles and parts. Auto sales rose last month at an annual pace of 17.9 million vehicles, the fastest since April, thanks to cheaper imports and discounts on U.S.-made vehicles.