Consumer spending up

Eve Troeh Oct 28, 2011
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Consumer spending up

Eve Troeh Oct 28, 2011
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Kai Ryssdal: So there’s austerity brewing in Washington, but American consumers are spending. Personal consumption expenditures — that’s Commerce Department speak for consumer spending — were up in September, for the second month in a row.

Could that be, at long last, the sound of a growing economy that’ll finally start humming along? Well, that is where the political economy of Washington hits the personal economy of our wallets. Marketplace’s Eve Troeh reports.


Eve Troeh: Consumer spending rose six-tenths of 1 percent in September. People didn’t just spend because they were making a tiny bit more money. They dipped into savings to buy some new clothes or a new car, and that can be a powerful force.

Beth Ann Bovino: The last few recessions, the consumer is really what rallied, is what basically led the economy back into recovery.

Beth Ann Bovino is deputy chief economist at Standard and Poor’s.

Bovino: This time around, they’re not doing it, and that’s why economists and businesses are scared.

Two months of consumer spending growth at less than 1 percent won’t drag the economy out of the hole. Bovino say consumers would have to dig deeper into savings for many more months for that. And news of major spending cuts in Washington gets people nervous about their finances.

Bovino: Some of those benefits I get from my government might get taken away. That means less spending for me.

But Stuart Hoffman at PNC Financial says lately, consumer confidence and spending don’t match up.

Stuart Hoffman: Watch what consumers do, not what they say, and they’re acting a lot better than they’re feeling.

Hoffman says one way to boost consumers’ moods would be for the Washington super committee to deliver a bipartisan spending plan — any sized plan — before their Thanksgiving deadline.

Hoffman: I think the beneficial effects to consumer confidence and to the markets would at least initially outweigh any negative effects over time.

Consumers will have years to absorb those deep government cuts, he says. And knowing that, they may feel more comfortable spending — just in time for holiday shopping.

I’m Eve Troeh for Marketplace.

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