Spending by American consumers rebounded in August, after falling in July because of the General Motors strike. Growth in their incomes nearly kept up.
Spending jumped 0.6 percent to a seasonally adjusted annual rate of $5.84 trillion after a rare 0.1 percent drop in July, the first in two years, the Commerce Department said today.Personal incomes, meanwhile, rose 0.5 percent - the most in six months - to a seasonally adjusted annual rate of $7.17 trillion. Incomes rose 0.4 percent in July and 0.3 percent in June; growth would have been more robust if not for the strike and related layoffs at GM suppliers.
Taxes, interest payments and savings largely account for the difference between consumption spending and income.
After-tax, or disposable, income grew 0.5 percent to a rate of $6.06 trillion. The savings rate - savings as a percentage of disposable income - sank to an abysmal 0.3 percent from an almost-as-bad 0.5 percent in July.
The figure suggests some Americans are saving less to maintain their standard of living or still are spending some of the stock market gains they've accumulated over the past several years.
Economic weakness overseas, principally in Asia, has slowed U.S. economic growth by slashing American export sales and curbing the profits of U.S. corporations. That, in turn, has triggered about a 15 percent drop in stock prices.
Nevertheless, Americans continue to spend relatively freely and domestic demand remains strong, spurred by the lowest long-term interest rates in three decades.
The GM strike contributed to the August rebound in spending. Spending on big-ticket durable goods, items including autos intended to last three or more years, rose 1.1 percent last month after slumping 4.6 percent in July.
Spending on services in August advanced 0.7 percent while spending on nondurable goods, such as food and fuel, rose 0.2 percent.
The most important component of income, wages and salaries, rose 0.8 percent in August. Reflecting the GM strike, manufacturing payrolls rose 1.3 percent after back-to-back drops of 0.7 percent in June and July.
Business owners' income also increased, as did interest and dividend income, rental income and transfer payments such as Social Security. Farmers' income, however, dropped, reflecting a decline in commodity prices produced by the Asian slump.