US consumer spending stalled in September

Friday 30 October 2009 15.02
'Cash for clunkers' - Scheme finished up
'Cash for clunkers' - Scheme finished up

US consumer spending fell for the first time in five months in September after a government programme boosting auto sales ran out.

Personal consumption expenditures decreased $47.2 billion or 0.5% last month, as expected by most economists, following a revised 1.4% jump in August, the US Commerce Department said.

The fall in spending came as Americans' income turned flat in September following a 0.1% increase the previous month, the department said.

The highly popular 'cash-for-clunkers' program, which gave consumers a credit of up to $4,500 toward the price of a new car or truck if they turn in an older vehicle with lower gas mileage, ended in August.

Government spending was key in fuelling the first US growth in one year in the third quarter, hauling the world's largest economy from a long and crippling recession, official data showed yesterday.

After four negative quarters, the world's largest economy grew at a seasonally adjusted 3.5% annual rate in the July-September period from the second quarter, the Commerce Department said.

The increase was the first since the second quarter of 2008 and the biggest expansion since the 2007 third quarter, when a US sub-prime mortgage crisis triggered a global financial crisis that subsequently hammered the world economy.

After shrinking a sharp 6.4% in the first quarter, the economy has been on life support from the federal $787 billion emergency stimulus and other crisis measures.

The third-quarter rebound was led by consumer spending, which accounts for two-thirds of US economic activity and added 2.36% to GDP growth. Other leading drivers were business inventories and home building.

Consumer spending surged 3.4% after a 0.9% drop in the second quarter, a rise the department said 'largely reflected' car purchases under the 'cash-for-clunkers' program in July and August.