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Spending outpaces income
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November 25, 1998: 9:12 a.m. ET
Personal spending rose 0.5% in Oct. as savings dipped; income was up 0.4%
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NEW YORK (CNNfn) - In an economic smoke signal that is bound to cheer retailers heading into the busy holiday shopping season, Americans' spending habits remained robust for the second straight month in October as consumers cozied up to the cash register.
Personal spending - estimated to account for as much as two-thirds of the nation's economic activity - increased 0.5 percent in October to a seasonally adjusted rate of $5.911 trillion dollars. That was just shy of expectations for a 0.6 percent rise but slightly behind a 0.7% increase with an identical increase in September, the Commerce Department reported Wednesday.
The strength in buying came at the expense of a 0.2 percent dip in savings.
In another key economic indicator, personal income, which includes wages and salaries and other labor income, rose 0.4 percent in October to a seasonally adjusted annual rate of $7.210 trillion after a slight 0.2 percent September rise. The income figures deduct Social Security taxes but not other taxes from its calculations.
The negative savings rate in September marked the first decline the department had recorded since it began compiling monthly income and spending figures in 1959. In the Depression years of 1932 and 1933 - when the income and spending statistics were released on an annual basis - savings fell 1.4 percent and 2.1 percent, respectively.
The release of the new data comes a day after the Commerce Department revised its estimate of third-quarter economic growth upward by 0.6 percent.
The agency said real gross domestic product, the total value of all goods and services produced by the nation's economy in a given period, rose 3.9 percent in the quarter, outpacing previous estimates for 3.3 percent growth.
Savings declined at an annual rate of $11.9 billion in October after being siphoned off to the tune of $9.1 billion a year in September.
Spending for relatively costly durable goods such as new cars and trucks were up 2.2 percent in September at a rate of $749.7 billion, after September's 2.5 percent jump. Spending on nondurables leapt 0.5 percent to $1.678 trillion after a 0.1 percent September rise.
The bond market spiked modestly on the news. The 30-year benchmark Treasury bond notched up 8/32, pushing the yield back to 5.19 percent.
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