Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Personal spending slides

Government report shows that individual spending fell more than expected in September while personal incomes rose.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Personal spending declined at a faster than expected rate in September, falling to its lowest level in more than four years, according to government figures released Friday.

The Commerce Department said personal spending decreased by 0.3% in September after stagnating in August. The measure has not been this weak since June 2004, when it fell 0.4%.

Economists had forecast a 0.2% decline in personal spending, according to a survey by Briefing.com.

Personal income, meanwhile, rose 0.2% in September after rising 0.4% in August. The Commerce Department said the decline from the previous month was due to the impact of Hurricane Ike on the Gulf Coast region.

Still, incomes grew faster than the 0.1% increase that economists were predicting.

Personal savings as a percentage of disposable income was 1.3% in the month, up from 0.8% in August.

Friday's report was "a confirmation of the economic challenges we currently face," said Michael Strauss, chief economist at Connecticut-based financial research firm Commonfund. But he added that the numbers were "not surprising" considering Thursday's report on the nation's gross domestic product.

Government figures released Thursday showed third quarter GDP, the broadest measure of economic activity, shrank at an annual rate of 0.3%, after a 2.8% growth rate in the second quarter.

Consumer spending, which makes up more than 70% of GDP, declined at an annual rate of 3.1% in the quarter, according to Thursday's report. It was the first time consumer spending fell since 1991 and the largest drop since early 1980.

Many economists worry that weak consumer spending will result in a negative reading in fourth quarter GDP. Two consecutive quarters of declining GDP are one of the classic definitions of a recession, though economists differ on this point.

Personal spending is likely to decline in October, Strauss said. "On balance, a decline of about 2% in fourth quarter GDP appears to be reasonable," he added.  To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
15 top-paid CEOs The 15 highest-paid corporate chiefs in America took home nearly $700 million last year -- about $47 million apiece on average. Expedia's Dara Khosrowshahi tops the list -- with $95 million in total pay. David Zaslav, who was no. 1 last year moves down to no. 15 this year. More
Driving Bentley's new SUV Spending an afternoon in Bentley's luxurious new $230,000 SUV. More
Best cars for the super-rich The Robb Report has selected these as the best new cars and SUVs for anyone who doesn't have to worry about how much they spend. More