WASHINGTON (MarketWatch) — Americans cut spending in September for the first time since the start of the year, as consumers bought fewer cars and trucks and spent less on energy because of falling oil prices.
Consumer spending dropped a seasonally adjusted 0.2% to mark the first decline since January. Economists polled by MarketWatch had expected a 0.1% increase.
The surprising decline in consumer outlays last month — and lukewarm gains so far this year — raise questions about how much cushion households have to spend. Economists have been expecting a stronger pickup in spending amid the fastest rate of job growth since the recession ended five years ago.
The good news is that incomes continue to rise, though a 0.2% increase in September was the smallest since the end of 2012.
Consumers largely appear to have pocketed the money. The amount of money individuals save rose to 5.6% last month from 5.4%, matching a two-year high.
A sharp decline in energy prices is allowing consumers to save even more money and that also contributed to the drop in spending in September. That frees up more money for Americans to spend on other discretionary items, however.
Auto sales were also softer in September, partly because of early Labor Day holiday that shifted more sales into August. Sales slowed to a 16.4 million rate last month from a 17.5 million pace in August. Car and truck sales are expected to snap back in October.
Meanwhile, inflation as gauged by the PCE price index edged up 0.1% in September, as did the core rate that excludes food and energy.
The PCE index has risen a smallish 1.4% in the past 12 months — the same as in August — but it could decline even further in the coming months because of lower energy prices.
Separately, the Labor Department reported that the employment cost index rose 0.7% in the third quarter, as wages climbed by 0.8%.
