Overall household spending [Note: household spending is different from the consumer spending I referenced in yesterday’s article, and this is a different report from the one I referenced yesterday] fell 0.2% from August, the first decline since January and only the third since the recession ended in mid-2009, the Commerce Department said Friday. The drop reflected a big decline in purchases of big-ticket items such as cars.
Falling demand for cars, household appliances, and other big-ticket (read: expensive—have you priced refrigerators or dryers lately?) items: is this a one-time blip or a trend resulting from pent-up demand being momentarily released? The old family beater finally wore out, and the family had to buy another car? That’s consistent with anemic consumer spending generally these last several quarters. Still, it could be a blip, and household spending (not the same as consumer spending, but close enough for the context) could be discovered to have resumed its slow growth when October’s numbers are published.
Americans’ overall income—including money from wages, investments, and government aid—climbed 0.2%, the smallest increase of the year.
Inflation-adjusted household spending on durable goods fell 1.9% from August, the sharpest decline since September 2009.
That’s at the consistently very low inflation rates, too. This is what we’re actually spending (or not) in terms of buying power—how far our paychecks go—and it’s a long-term trend. These wage and adjusted spending numbers don’t comport with hopes of higher spending, and so of real economic recovery in the near or medium-term future.
Friday’s report also showed US inflation remains below the Federal Reserve’s annual 2% target. The price index for personal consumption expenditures—the Fed’s preferred inflation measure-rose 0.1% from August and 1.4% from a year earlier.
Low inflation is good, but inflation this low is reflective of low demand. See above, regarding income, for an idea of future recovery.