Ahead of the Bell: US consumer Spending

WASHINGTON (AP) ? Americans likely spent more money in September and earned a bit more.

Economists were looking for consumer spending to increase 0.6 percent in September, up from a 0.5 percent increase in August. Income was expected to have risen 0.3 percent, slightly faster than the 0.1 percent gain in August. The Commerce Department was scheduled to release the report at 8:30 a.m. EDT Monday.

The report will be released despite the threat from Hurricane Sandy, which is bearing down on much of the East Coast.

A pickup in consumer spending helped lift economic growth in the July-September quarter to a still-modest 2 percent annual rate. The overall economy had grown at a 1.3 percent rate in the April-June period.

Consumer spending is closely watched because it accounts for 70 percent of economic activity.

While the slight acceleration in growth in the July-September period was seen as encouraging, economists are still worried that the economy is stuck in a slow-growth rut. Few Americans are seeing the level of pay increases needed to spur enough spending growth to rapidly lower unemployment.

Republican Mitt Romney has made Barack Obama's handling of the economy the key issue in his campaign to make Obama a one-term president.

The slight pickup in growth last quarter occurred in large part because consumers spent more. Consumer spending grew at an annual rate of 2 percent, up from 1.5 percent spending growth in the spring quarter.

In September, consumers spent more money at retailers, a buying surge that reflected higher consumer confidence and the launch of the latest iPhone. Retail sales in both September and August rose at the fastest clip in two years.

The spending gains reflect in part rising consumer confidence. The University of Michigan reported Friday that its final consumer sentiment index for October had hit a five-year high. Falling gas prices and a slightly better job market were credited with lifting consumers' outlook.

The unemployment rate fell to 7.8 percent last month, the first time it has been below 8 percent since January 2009, the month Obama took office.

The economy is getting support at the moment from a revitalized consumer and the early stages of a housing recovery. But more than three years after the Great Recession ended, the nation continues to struggle because businesses are reluctant to invest and slower global growth has cut demand for exports.

While the rise in consumer confidence suggests that spending will keep growing, the concern among economists is that income growth is still lagging and the economy is not growing fast enough to spur a significant upturn in hiring.

The Federal Reserve at a meeting last week said it planned to continue its economic stimulus efforts, including a program in launched in September to buy $40 billion monthly in mortgage bonds as a way to drive mortgage rates lower and stimulate more home sales.

The Fed said it would keep up its currents efforts and would consider doing even more until it saw a substantial improvement in employment. Some economists believe that it will take until the second half of next year for the Fed's program to boost economic growth into a range of 3 percent or higher.

Source: http://news.yahoo.com/ahead-bell-us-consumer-spending-102654412.html

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