Consumer spending on clothing and footwear swung back up in September, marking five consecutive months of alternating increases and decreases, and reflecting the unstable readings from key economic indicators of the U.S. economy.
Real personal consumption expenditures (PCE) for clothing and footwear rose 0.76 percent in September to $425.65 million from $422.45 million in August, according to estimates released Thursday by the Bureau of Economic Analysis (BEA). In August, consumer spending on clothing and footwear fell to its lowest level in six months.
One example of instability in the economy is the gross domestic product (GDP). Macroeconomic Advisers by IHS Markit estimates that GDP advanced at a 1.3 percent annual rate in the third quarter, down from 2 percent growth in the second quarter and 2.3 percent growth averaged over four quarters ending in the second quarter.
Part of the slowdown reflects the continuation of an “inventory flow correction” in the third quarter, whereby the pace of production was reduced by an economy-wide desire to slow the pace of inventory-building, IHS Markit said. However, Macroeconomic Advisers said “the fundamentals for consumer spending are solid, and housing activity, boosted by past declines in mortgage rates, is firming. All of this suggests growth should pick up in the coming quarters.”
The BEA report said overall real PCE, adjusted for inflation, increased 0.2 percent, or $22.8 billion, in September, reflecting an increase of $18.4 billion in spending for goods and a $6.5 billion increase in spending for services, BEA noted. Within goods, new motor vehicles were the leading contributor to the increase. Within services, the largest contributor to the increase was spending for health care.
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The PCE price index fell less than 0.1 percent. Excluding food and energy, the core PCE price index increased less than 0.1 percent.
Personal income increased 0.3 percent, or $50.2 billion, in September, primarily reflecting increases in personal interest income, farm proprietors’ income and government social benefits, BEA said.
Disposable personal income (DPI), an important barometer of retail sales, rose 0.3 percent, or $55.7 billion. The National Retail Federation (NRF) reported that clothing and clothing accessory store sales were down 0.7 percent year-over-year, but up 1.3 percent month-over-month seasonally adjusted, as overall retail sales, excluding automobile dealers, gasoline stations and restaurants, were down 0.1 percent seasonally adjusted in September, but up 4.5 percent unadjusted year-over-year.
“The pullback in September compared with August is possibly a reaction to increased fears over U.S.-China tensions,” NRF chief economist Jack Kleinhenz said. “While uncertainty around trade policy and other issues has dampened consumer sentiment recently, consumers still have a lot going for them as evidenced by longer-term trends and factors like the tight labor market.”
BEA adjusted September wages and salaries downward by $1.9 billion (at an annual rate) to account for the United Automobile Workers work stoppage that began on Sept. 16. This adjustment was necessary because the source data BEA primarily uses to estimate monthly wages and salaries–the Bureau of Labor Statistics’ Current Employment Statistics survey–did not capture the strike’s effects.
Farm proprietors’ income increased $23.3 billion in August and $12.1 billion in September, with payments associated with the Department of Agriculture’s Market Facilitation Program, which includes cotton farmers, were substantial contributors to both increases.
Personal outlays increased $23 billion in September. Personal saving was $1.38 trillion and the personal saving rate–personal saving as a percentage of disposable personal income–was 8.3 percent.