Personal Spending Rose in October
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Whether people were getting an early start on their holiday shopping, or whether some glimmer of confidence is returning, personal spending rose in October. Indeed, even though President Barack Obama warned that a double-dip recession is possible, it is hard to ignore the news on the consumer spending front. People are ready to go out and spend a little money.
Of course, personal spending isn’t getting a completely free pass as the savior of the economy. Things could still slow going forward, reports MarketWatch:
While some economists have been concerned that sluggish income growth is a major challenge for consumers in the fourth quarter, Ian Pollick, economics strategist with TD Securities, said the Wednesday data are strong and indicate that government stimulus programs are propping up consumer spending.
“Additionally, there is some evidence of decent organic growth,” Pollick wrote in a research note. “Going forward, though, outside of government support, weak labor markets and a slow trajectory of recovery should subdue the monthly pace of advance in the spending category.”
One of the main factors is continued weakness in the jobs market. While this week’s initial claims are showing vast improvement, and signs of jobs market stability are appearing, there is still some weakness that cannot be denied. And that weakness could mean that personal spending, though increasing, could still remain sluggish.
Returning to credit to finance holiday spending?
On a note of personal inquiry, I wonder at this increase in consumer spending. It appears as though the holiday spirit is helping things along. But at what cost? Accounts from earlier in this year indicated that people were paying down debt. Now, with a little extra room on the credit cards, are some maxing them out again in the name of the holidays?
This could very well be the case, since consumer spending in October outgrew the pace of personal income growth, and the savings rate began falling again. It would, indeed, be a sad thing if all of the lessons of the recession were forgotten in the haste to spend a great deal this holiday season.
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