Consumer Spending Picks Up in September

WASHINGTON, D.C. -- The U.S. Commerce Department reported that consumer spending rose solidly in September, putting the economy on firmer footing moving into the fourth quarter despite the fact that consumers pulled back on personal saving in order to fund their purchases, according to the Associated Press. In total, consumer spending increased by 0.8 percent, marking the largest jump since February following an unrevised 0.5 percent gain in August.

"The jumping off point, or the base point, is already pretty high. You have a lot of momentum going into the fourth quarter," stated Ellen Zentner, a senior U.S. economist at Nomura Securities.

The increase surpassed economists' expectations of a 0.6 percent increase. Adjusted for inflation, consumer spending rose 0.4 percent, up from August's 0.1 percent increase.

Last week's report on the gross domestic product during Q3 incorporated the new spending figures. Overall, consumer spending increased at a two-percent annual pace during the quarter, up from a 1.5 percent rate during Q2. Spending was concentratef on long-lasting goods such as cars and the new iPhone 5, the AP reported.

Personal income grew 0.4 percent during September, the biggest increase since March, but the amount of money consumers had at their disposal minus inflation and taxes was flat, forcing them to cut back on savings. The 3.3-percent saving rate was down from 3.7 in August and was the lowest since November 2011.

"We have only seen two lower readings on the savings rate in the recovery, which suggests that the consumer has virtually no cushion to absorb the scheduled tax hikes at the beginning of 2013," stated John Ryding, chief economist at RDQ Economics.

Increased gasoline prices reportedly elevated inflation pressures to some degree, but a core measure that strips food and energy costs increased 0.1 percent for the third month in a row, indicating that the overall rise in inflation will be a short-term increase, according to the report.