FEBRUARY IS ANOTHER BAD MONTH FOR CONSUMER SPENDING

The Commerce Department reported this morning that consumer spending, which accounts for two-thirds of total economic activity, was up 0.1% in February. When adjusted for inflation, consumer spending was flat. This would seem to lend more credibility to the claim that the United States is entering into a recession, as many economists have been saying recently.

MORE GLOOMY ECONOMIC REPORTS ISSUED FRIDAY

Consumer spending after adjusting for inflation was flat in January for the second consecutive month. And, the Reuters/University of Michigan consumer sentiment numbers were the worst since 1992.

From USA Today:

The Commerce Department said consumer spending posted a 0.4% rise in January. However, all that gain came from a surge in inflation. Taking away the effect of higher rices, spending showed no gain in January or December.

Consumer sentiment dropped to a 16-year low in February on worries about declining incomes and rising unemployment, the Reuters/University of Michigan Surveys of Consumers showed.

Adding to the grim view, consumer expectations for the future also hit a 16-year low, while worries about their ability to makes ends meet and the overall economy were as bad as they have been in decades, the survey said.

PERSONAL INCOME AND CONSUMER SPENDING REPORT ISSUED

From The New York Times:

Personal income and spending continued to grow in September, a government report showed today, suggesting strength in the economy even as analysts fear widespread troubles in the next few months.

Still, consumption began to slow, and manufacturers may be starting to feel the effects of a tightening housing market.

Personal spending, which accounts for two-thirds of the gross domestic product, grew at 0.3 percent in September, a slight deceleration from the 0.5 percent growth in August, the Commerce Department said today.

Spending is up 5.6 percent over the last 12 months, probably bolstered by a comparable rise in personal income, which has increased 6.8 percent over the last year.

Income rose 0.4 percent last month after an identical gain in August. Disposable income, a measure of the money employees take home after taxes, dipped to 0.4 percent from 0.5 percent in August.

Today’s report offered few surprises, though it could provide some comfort to economists who predict a decline in economic growth in the fourth quarter. Analysts are waiting for a worsening housing recession to make its way into the broader economy, but for now consumers appear to be comfortable with opening their wallets.

The personal consumption expenditures index, an inflation gauge closely watched by the Federal Reserve, also stayed steady. Core inflation, which excludes volatile food and energy prices, rose 1.8 percent on an annual basis, keeping pace with a downward trend over six months.

But overall inflation, as measured by the P.C.E. deflator, is up 2.4 percent for the year, above the Fed’s so-called comfort zone of 1 percent to 2 percent. That rise, compared with 1.8 percent in August, likely reflected the surging cost of crude oil, which pushes up gasoline and energy prices.

CONSUMER CONFIDENCE HITS TWO-YEAR LOW

From USA Today:

A key barometer of consumer sentiment dropped to the lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.

The Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. The reading marked the lowest level since October 2005 when it was 85.2. Analysts had expected 99.5.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

SOME POSITIVE ECONOMIC NEWS, FINALLY

Although surveys indicate that consumer confidence is falling, consumer spending was on the rise in August. And, while inflation is a concern, core PCE, an inflation figure favored by the Federal Reserve that excludes food and energy, came in at an acceptable 1.8% on an annual basis.

From The New York Times:

Americans made more purchases than expected in August and a crucial inflation indicator cooled, the Commerce Department said yesterday, two indications that the economy is still somewhat insulated from turmoil in the residential housing market.

Consumer spending rose a better-than-forecast 0.6 percent last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3 percent, down from a 0.5 percent rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July.

Consumers also caught a break on rising prices in August. A closely watched inflation gauge, the core personal consumption expenditure deflator, posted its smallest year-over-year gain since February 2004. The core deflator index, which excludes food and energy prices, rose 1.8 percent on an annual basis, continuing a downward trend that stretches back to February.