U.S. Consumer Spending Rose 0.5% in October
By Josh Mitchell
Americans' spending rose 0.5% in October while incomes fell
0.7%, amid signs the economic recovery was slowing.
Consumer spending appears to have increased more slowly recently
after rebounding strongly this summer. But it has been good enough
to help fuel economic growth since the sharp recession this past
spring, when the coronavirus pandemic forced millions of
businesses, schools and government agencies across the U.S. to shut
down or limit their activities. Consumer spending represents more
than two-thirds of economic activity in the U.S.
The recent economic data have been mixed, showing signs of both
strength and weakness.
Job growth was robust in October, though it has slowed every
month since June. Unemployment fell a full percentage point to
6.9%, but remains high at nearly double the February 3.5% rate.
Retail sales rose in October, but at their slowest pace since
spring. Economic output rose at a record rate in the third quarter
but remains well below pre-pandemic levels. And the outlook is
A new wave of virus infections over the past month has led some
cities and states to impose new restrictions, such as evening
curfews, that could reduce households' ability to spend. Americans'
confidence in the economic outlook dimmed this month, the
Conference Board, a private research group, said this week. The
Jan. 1 expiration of expanded unemployment benefits will likely
lead to a drop in income for many jobless workers.
Still, Americans appear to be gradually increasing their
spending. While they aren't spending on airfares, hotel rooms or
concerts, they have increased spending on cars, appliances and
building materials for home projects. U.S. households overall have
paid down debt and boosted their savings, which could help enable
them to keep shopping in the near term.
"The economy is resilient," said Rubeela Farooqi, chief U.S.
economist at High Frequency Economics, before Wednesday's data.
"What we're looking at is the split nature of the recession. People
who recovered their jobs, they're able to save and spend on goods.
On the other hand, you have a substantial number of people who are
low-income people who don't have jobs to go back to."
The economy's path ahead depends partly on the fate of workers
like Ben Milano, a 59-year-old married father of twin girls in Long
Mr. Milano lost his job at a travel company -- he had managed
and organized corporate travel events -- in March, as companies
canceled events world-wide. Then his wife, an ear doctor, was
furloughed. The couple cut spending broadly.
His wife was called back to work this summer and Mr. Milano
started receiving unemployment benefits. They resumed certain types
of spending. Mr. Milano recently had surgery on his back from an
injury incurred this summer, and the couple recently repaired a
broken pipe in their bathroom.
But they are looking to cut back again. In January, they will
have to resume payments on their mortgage as a reprieve granted by
their bank expires. In March, his jobless benefits expire.
"Do I go into my 401(k) and start pulling out of that?" he said.
"I'm not so worried for January. I'm worried about March, if this
continues the way it is."
Write to Josh Mitchell at email@example.com
(END) Dow Jones Newswires
November 25, 2020 10:30 ET (15:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.