US consumer spending falls in September

| October 30, 2009 | 0 Comments
US consumer spending falls in September

The Government’s Car Allowance Rebate System (CARS), branded the “cash for clunkers” scheme, is believed to have contributed to the fall in US consumer spending, which fell for the first time in five months in September, and was the largest decline since December.

According to the US Commerce Department, spending fell 0.5% in the month, compared with a rise of 1.4% in August.

The popular “cash for clunkers” scheme, which was designed to help bring the US economy out of recession by boosting new car sales, gives car owners federal subsidies of up to $3,500 for trading in their old cars for new ones.

However the scheme ended after the $3 billion funding set aside for it ran out and major carmakers, such as General Motors, reported a severe fall in sales.

Peter Jankoskis at Oakbrook Investments comments: “The fact that September held up well after the end of the ‘cash-for-clunkers’ programme is a good sign.”

“The fact that it wasn’t worse than expected is putting a floor under the futures right now. It’s not positive news, but it may be preventing it from falling further,” added Mr Jankoskis.

In related news, official figures this week revealed that the US economy expanded at an annualised rate of 3.5% between the July and September period, suggesting that the economy has exited its worst recession in 70 years.

The figures have come as no surprise after many economists had expected that the economy would experience positive growth in the third quarter.

The growth pace in GDP exceeded expectations, with many expecting growth of 3%. The US economy last experienced growth in the second quarter of 2008, when it grew 2.4%.

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