Consumer Spending on Track for Sustained Growth in Q4

By: Asha_Bangalore

Real consumer spending rose 0.3% in October, following a 0.2% gain in the prior month.  A large part of the increase was from purchases of cars and other recreational vehicles.  Outlays on services held steady during October after a 0.1% increase in September.  The October consumer spending data combined with conservative projections in the last two months of year points to moderate growth during the fourth quarter. 

However, if the October pace of consumer spending prevails in the next two months, our current forecast of real GDP growth for the fourth quarter would have to be raised.  Consumer spending during the last six months has posted the longest stretch of gains in the current recovery. 

Personal income moved up 0.5% in October after an unchanged reading in the prior month.  The 0.6% jump in wages and salaries during October is impressive.  Personal saving as a percent of disposable income inched up to 5.7% in October from 5.6% in the previous month.  The personal saving trajectory of the U.S. economy has moved to a higher level from a historical low of 1.4% in 2005 (see Chart 2).

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2010 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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