Americans carve back spending in September

Source: Housingwire
Americans' Spending Reports Retreat After August Surge
Average daily spending estimate in September down to $84 from $95
by Jeffrey M. Jones

PRINCETON, NJ -- Americans' self-reports of daily spending averaged $84 throughout September, down sharply from August's $95, and the lowest monthly figure since February. The August average had been the highest in any month in five years. Though down, the September average remains above the levels Gallup measured from 2009-2012, and is the highest for any September since 2008. The results are based on Sept. 1-30 Gallup Daily tracking. Each day, Gallup asks Americans to report how much they spent the prior day, excluding major purchases such as a home or car and normal household bills. The data give an estimate of discretionary consumer spending. In the six years Gallup has tracked spending, the September estimates have typically been lower than the August estimates. Thus, last month's decline is not unexpected, although it is a significantly larger decline than what Gallup recorded in prior years. In fact, the one-month decline of $11 ranks among the largest Gallup has measured since 2008. Declines of that magnitude are more commonly found between December and January, reflecting the typical surge in spending around the holidays and the pullback the following month. The other recent major declines in spending came near the beginning of the 2008-2009 recession. In addition to the typical August to September decline, the drop in spending last month could have been influenced by the decline in Americans' confidence in the economy over the course of the month. Spending Down Among Most Subgroups Self-reported spending declined by an average $15 among upper-income and $10 among lower- and middle-income Americans in September. However, the $10 decline for lower- and middle-income Americans was concentrated among those whose annual household incomes range between $60,000 and $90,000. Spending among this group declined from $122 per day in August to $87 in September. There was a smaller $6 decline, from $81 to $75, among those in the $24,000 to $60,000 range, and no change among those whose incomes are less than $24,000 per year. Spending in September fell below the $100 mark for Americans between the ages of 30 and 49 for the first time since March. It also dipped below $100 for those aged 50 to 64, men, and parents of young children. The declines tended to be greater among groups whose spending is usually higher than that of other groups. Implications The August increase in spending, observed in Gallup's self-reported measure and in government estimates, was clearly an encouraging sign for the economy. Spending estimates from Gallup and the government seem to indicate that consumers are moving beyond the "new normal" period of more limited spending observed from 2009 to 2012. However, the higher spending levels Gallup measured in August were not sustained in September. With consumer spending such a key component of U.S. economic growth, the pullback suggests a full recovery from the recession may still be a ways off. To the extent Americans' decreased spending is tied to concerns about the larger economy, driven to a large degree by the run-up to, and commencement of, a federal government shutdown, it suggests the effects of the government's budget stalemate go well beyond the temporary halting of non-essential government services. And progress toward a full economic recovery may be on hold until the government successfully addresses the budget situation, as well as the coming Oct. 17 deadline to raise the federal debt limit.

URL to original article: http://www.gallup.com/poll/165278/americans-spending-reports-retreat-august-surge.aspx

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