U.S. consumer spending falters; wage gains highest since 2008

Fri Oct 31, 2014 1:28pm EDT
 
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer spending fell for the first time in eight months in September, suggesting the economy lost some momentum heading into the fourth quarter.

But rising consumer sentiment and faster wage growth suggest the weakness in spending will be temporary, with the economy remaining on firm ground.

"The fundamentals ... remain very solid," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. "The conditions are in place for continued above-trend growth."

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, slipped 0.2 percent last month after rising 0.5 percent in August. The decline was the first since January.

While the data led some economists to pare estimates for fourth-quarter gross domestic product, most still look for an annual growth pace of 2.5 percent to 3.0 percent after the third quarter's brisk 3.5 percent clip.

"What we are getting is a frustrating mix of conflicting data. This is a reflection of 3 percent growth," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

Separately, the Thomson Reuters/University of Michigan's index of consumer sentiment rose to 86.9 in October from 84.6 last month. Sentiment has been steadily rising in recent months, and now stands at its highest level since July 2007.

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A woman eats ice cream as she looks at the display in the window of a Gold Standard jewellery store that specializes in purchasing raw gold and silver in New York April 15, 2013.     REUTERS/Lucas Jackson