Personal consumer spending in the United States declined in August as data shows that the main factor was due to personal income falling more than expected for the first time in almost two years, consequently keeping Americans away from spending.
American consumers increased their spending by only 0.2 percent which was in line with economists’ predictions but this was a drop from July’s revised 0.7 rise in spending. The data were based on “nominal” (unadjusted) values. In “real” terms, (where the effects of price changes/inflation are removed over time), personal spending was flat in August compared to a gain of 0.4 percent in the previous month.
Economists explained the main reason for the weak spending data was due to personal incomes decreasing by 0.1 percent in August, the first decline since October 2009.
Consumers right now have extremely low confidence on the health of the economy both in the US and overall on a global scale. Households are uncertain about future earnings and employment prospects, and because of that there is a degree of hesitancy with respect to spending especially on big ticket items like washing machines or automobiles.
Data show that vehicle sales came at a 12.1 million seasonally adjusted annual rate in August, which was down 100,000 cars from the prior month.
Despite the weak data, the US dollar remains strong today due to an overall damp risk sentiment in markets which pushes investors away from risk currencies and turn to the safer liquid dollar. Also there is high dollar demand due to month-end fixing today.