Consumers boosted their spending in September by 0.2 percent going into the fourth quarter, matching August’s increase but coming in slightly below economists’ expectations, The Wall Street Journal reported on Thursday (Oct. 31).
Incomes are also up 0.3 percent, which kicked the U.S. savings rate to 8.3 percent in September, the highest number since March.
Compared to last year, spending went up less, which is what economists anticipate for the rest of 2019 due to a wider downturn in economic growth.
“We’re still in an expanding economy, but one that is expanding at a slower clip,” Gregory Daco, chief U.S. economist at Oxford Economics, told the WSJ.
Forecasting firm Macroeconomic Advisers lowered its 4Q GDP growth to a 1.6 percent annual rate from 1.7 percent. Overall U.S. economic growth is at a 1.9 percent annual rate, down from 2 percent in 2Q, according to figures from the Commerce Department.
The Federal Reserve said on Wednesday (Oct. 30) that it was planning to lower the federal funds rate between 1.5 percent and 1.75 percent, the third reduction since July.
Advertisement: Scroll to Continue
Overall conditions for U.S. consumers are positive, with stable income growth and unemployment at a 50-year low. Conversely, businesses are holding off on spending in reaction to tariffs and political misgivings.
“The danger is that businesses begin to pull back not only on capital spending but also on payrolls, which would take much of the steam out of growth in consumer spending,” Richard Moody, chief economist at Regions Financial Corp., told the WSJ.
On the global front, the International Monetary Fund (IMF) is forecasting economic growth to slow to 3 percent in 2019, down from a July prediction of 3.2 percent. This is the slowest economic pace in the past 10 years. The IMF associated the slowdown with trade barriers that caused worldwide manufacturing and investment stagnation.
After record levels of optimism among U.S. small business owners last year, confidence started slipping in January. Small business owners also showed a decline in the number of entrepreneurs who thought it was a good time to expand their businesses.
