Consumer Spending Actually Fell in September
Well, we see another example of Bush Administration news management at work. Yesterday, with much fanfare, the Administration trumpeted its great third quarter GDP numbers, and got at least one news cycle of all good news, notwithstanding Paul Krugman’s levelheaded column today. Today, on news-dump Friday, we find out that consumer spending in September actually fell more than analysts expected. After healthy gains in July and August, September’s numbers fell three-tenths of one percent. Keep in mind that yesterday’s GDP report was only the first report for the third quarter, and it will be revised twice more, once a month from now, and again months after that. Since the government made a big deal about strong consumer spending yesterday in the third quarter, we now know that those numbers they were touting were in fact offset by falling numbers in the most recent month, September.
The largest over-the-month decrease in spending in a year, reported Friday by the Commerce Department came after consumer spending shot up by 1 percent in July and then another 1.1 percent in August. Consumers spent more lavishly earlier as they began to see the cash from President Bush's third round of tax cuts.
Economists had said in advance of Friday's report that the brisk pace of spending — which helped spur a 7.2 percent annual rate of growth in the third quarter — just couldn't be sustained. They had predicted that shoppers would rein in their finances in September, and they did just that. Analysts had forecast a 0.1 percent decrease in spending. The 0.3 percent decline was the largest since a 0.4 percent drop in September 2002.
In September, consumer spending on "durable" goods — big-ticket items, such as cars and appliances, expected to last at least three years, was cut by 5.1 percent, reversing part of August's 3.8 percent gain. But for "nondurables" such as food and clothes, consumers boosted spending by 0.3 percent in September, after a 1.4 percent increase the previous month.
The experts this morning feel that the effects of the Bush tax cuts are already dissipating. So how likely is it that the 7.2% GDP number we saw yesterday will be revised downward in a month when it is clear that consumer spending was in fact already leveling off after August? But at least the Administration got to manage the perceptions for at least a cycle or two, right?