US consumers increased their spending in September, providing a boost for retailers, but dug into their savings to do so, new data shows.
Consumer spending increased by 0.6 per cent in September, picking up pace from an 0.2 per cent gain in August, the US Commerce Department said.
On a quarterly basis, the spending rate rose to 2.4 per cent, better than economists expected, as people spent their money on big-ticket durable goods.
“September spending was lifted by the goods components, with durables - dominated by autos – up 2.2 per cent and non-durable goods up 1.1%,” said Ian Shepherdson, chief US economist at High Frequency Economics.
But incomes rose by just 0.1 per cent, leaving squeezed households taking the decision to spend at the expense of saving money.
Savings across the US dropped to the lowest level seen since the depths of the recession in August 2009, the data showed, to $419.8bn in September, whereas in August, savings were $479.1bn.
The savings rate fell to 3.6 per cent, the lowest since December 2007.
Shepherdson said this was not necessarily a bad thing.
“This is partly a positive development because it means people were willing to save less to offset the cash hit from higher gas prices, despite grim sentiment data,” he said.
A separate report from the Labor Department showed wages and salaries expanded 0.3 per cent in the third quarter – the smallest rise in a year – after gaining 0.4 per cent pace in the prior quarter.
US Treasuries prices held steady at higher levels after the data. Stock index futures were lower after a big rally on Thursday, while the euro extended a decline against the dollar.