By Amara Omeokwe
U.S. households boosted spending for a fifth straight month,
helping the economy dig further out from the deep hole created by
The Commerce Department said personal-consumption expenditures
-- a measure of household spending on goods and services -- rose
1.4% last month. Consumers have increased spending since the
summer, although the pace of gains slowed into early fall.
Personal income -- a measure of what households receive from
wages and salaries, government aid and investments -- was up last
0.9% month, after a sharp decline in August, rising on higher pay
and remaining pandemic-related aid.
Consumers last month doled out more on autos, clothing and
footwear, continuing a trend of robust outlays on goods due to
pent-up demand from pandemic-related economic disruptions.
Goods spending rose 2%, on a seasonally adjusted monthly basis.
Spending on services was up 1.1% over the month, with higher
outlays on health care, fitness and entertainment. Services
businesses were hit particularly hard by the pandemic, and
service-sector spending remains below pre-pandemic levels.
Richard Moody, chief economist at Regions Financial Corp., said
spending trends have reflected a continuing economic upturn,
particularly among households that have seen limited job and income
"You still think overall consumer spending is going to continue
to grow, just maybe not as strongly as it otherwise would have if
either the labor market were fully healed or there having been
another round of financial assistance," from the federal
government, Mr. Moody said.
Recent private-sector data show consumer spending remains below
2019 levels, led by lower spending on services such as travel,
entertainment and restaurants. JPMorgan Chase & Co.'s tracker
of credit- and debit-card transactions showed that spending was
down 5.2% from a year earlier in the week through Oct. 25.
Coronavirus cases have been rising across the U.S., creating new
uncertainty as businesses once again face operating restrictions
and staffing challenges, particularly at restaurants and other
"Services spending will take some time to completely recover,"
said Pooja Sriram, U.S. economist at Barclays Capital. "It's highly
contingent on how confident households feel going out and engaging
in those services, given that many of them require in-person
The pickup in personal income last month reflected the effect of
a federal supplement to state unemployment benefits that provides
recipients with an extra $300 weekly. The end of a separate program
that provided a $600 weekly bonus to recipients of unemployment
benefits weighed on personal income last month, similar to
Personal income in September, nonetheless, was buoyed by a rise
in compensation of employees, including for temporary Census
workers, the Commerce Department said. Wages and salaries rose 0.8%
last month, a smaller gain than the prior month.
A separate report showed consumer confidence in the U.S.
increased slightly in October compared with September, but data
collected during the second half of the month showed sentiment is
stalling, according to a University of Michigan survey released
The final reading of the index of consumer sentiment was 81.8 in
October, marginally higher than the initial estimate from two weeks
ago and slightly up from September's 80.4 level. Consumer
confidence is 14.3% lower compared with the same month a year
Government stimulus to help people weather the pandemic provided
a financial cushion to households that has propelled spending in
recent months, said Lindsey Piegza, chief economist at Stifel
Nicolaus & Co. For example, the federal government allowed for
deferred payments on certain types of student loans and
"We see that consumers are still spending. In many cases, they
are spending differently, meaning the composition of goods and
services in their basket are different now," Ms. Piegza said.
Companies such as Mattel Inc. and Chipotle Mexican Grill Inc.
this month posted strong quarterly sales figures, reflecting
American households' increased interest during the pandemic in
at-home entertainment and food that can be ordered online. Orders
for long-lasting factory goods rose for the fifth straight month in
September amid strong demand for household furnishings and
vehicles. Spending on long-lasting goods was up 3% last month.
Carter Rabasa, a self-employed events planner from Seattle, said
he and his family over the course of the pandemic had purchased a
$1,500 pergola for their backyard, along with making other
improvements to their garden area. He said his family had also
boosted spending on things such as takeout food.
"We think of it as a sort of pandemic relief. The kids are
having this dreadful remote school experience. We're just trying to
think of things that will brighten the day and those things cost
money," Mr. Rabasa said.
U.S. gross domestic product in the third quarter rose a record
7.4% compared with the second quarter, the Commerce Department said
Thursday, as the economy rebounded with the easing of lockdowns and
other restrictions on business and consumer activity.
Consumer spending contributed strongly to growth, increasing at
a 40.7% annual rate in the third quarter.
Meanwhile, the Labor Department reported initial jobless claims,
a proxy for layoffs, fell by 40,000 to 751,000 in the week ended
Oct. 24. That was the lowest level of claims since mid-March,
although they remained historically high.
Robert Frick, corporate economist at the Navy Federal Credit
Union, said economic uncertainties linger, amid a resurgence in
coronavirus infections and unevenness in the U.S. labor market,
with signs that some layoffs during the pandemic are becoming
permanent job losses.
As a result of pandemic-related woes, companies ranging from
Boeing Co. to Ralph Lauren Corp. have recently announced job cuts.
Boeing said it expects to reduce its head count by another 11,000,
building on previously announced cuts to its workforce.
"We're in a precarious place. The twin variables, Covid and
stimulus, are even more important than they were, say, a month or
two ago," Mr. Frick said. Job growth "seems to be slowing down more
than people anticipated, so we need stimulus."
Further federal coronavirus stimulus is unlikely for now,
however. Despite weeks of negotiations, Washington lawmakers and
Trump administration officials haven't reached an agreement on
providing more aid.
Several federal coronavirus aid initiatives have already ended
or are winding down. A spokesperson for the Federal Emergency
Management Agency said 54 states and territories have been awarded
$42 billion to provide the $300 weekly supplement to recipients of
state unemployment benefits. President Trump in August issued an
executive action allowing states to receive $44 billion in FEMA
funds to issue the enhanced benefits, meaning the agency has
distributed most of the available funds.
Meanwhile, Americans' short-term outlook on economic conditions
worsened this month, weighing on an index of consumer confidence
from data firm The Conference Board.
Valarie Black, a single mother of two from Harrisburg, Pa., said
she was furloughed from her job as a hotel sales manager in March
and ultimately laid off in June. Since then, Ms. Black, 43 years
old, said she had been collecting unemployment benefits and
searching for work. Finally this month, as her unemployment
benefits expired, she accepted a sales position at a car
dealership. The pay is commission-based.
"At this point, it's better than making nothing. I know I'm a
hustler and I know a lot of people in the area, so I'll just do
what I can to sell them cars," Ms. Black said.
But she said she is being conservative with spending.
"At this time, it's a hold on everything until Christmas comes
around for my kids," she said.
--Eric Morath and Xavier Fontdegloria contributed to this
Write to Amara Omeokwe at email@example.com
(END) Dow Jones Newswires
October 30, 2020 12:00 ET (16:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.