Personal income and spending growth in the U.S. remained strong in September, according to recently released data from the U.S. Department of Commerce.
Personal disposable (after-tax) income increased by 2.7% on a 12-month smoothed basis, to $14.4 trillion, the sixth consecutive month in which income grew between 2.6% and 2.7%.
Although income growth was slightly below expectations, total consumption increased by a bigger (and better than expected) 4.4%, to $13.5 trillion.
Most of the increase was in services. Spending on nondurables, which includes apparel, had the lowest increase of any major sector, helped by low inflation in apparel and other key categories.
Savings as a percent of disposable income fell to just more than 3 percent in September, its lowest level since December of 2007, the start of the Great Recession. It is also a significant decline from the 6.3% peak seen in October 2015. The strong job and financial markets are bolstering consumer confidence, causing them to spend more and save less.
Consumer spending on apparel and footwear increased by 1.3% in September, the smallest increase in the combined category in six and a half years.
Consumption of apparel alone edged up by 1.5%, while footwear spending slowed dramatically, to an increase of only 0.9%. This has been partially due to pricing. In September, apparel prices were flat compared to the prior year, while footwear prices dropped by 0.8%.
Since 1992, apparel’s “share of wallet” has decreased from 4.5% of disposable income to a level just above 2.7%, as consumers dedicate more of their take-home pay to experiences like travel, entertainment and dining out, and to education and health care.