Make us your home page
Instagram

Sandy slowed U.S. consumer spending and pay in October

A sign advertises a sale last month on a storefront in Philadelphia. The Commerce Department said Friday that consumer spending dropped 0.2 percent in October. 

Associated Press

A sign advertises a sale last month on a storefront in Philadelphia. The Commerce Department said Friday that consumer spending dropped 0.2 percent in October. 

WASHINGTON — Americans cut back on spending last month while their incomes remained flat. The weakness in part reflected disruptions from Hurricane Sandy that could slow economic growth for the rest of the year.

The Commerce Department said Friday that consumer spending dropped 0.2 percent in October. It was the weakest figure since May, and it compared with a 0.8 percent spending increase in September. Income had risen 0.4 percent in September.

Work interruptions caused by the storm reduced wages and salaries in October by about $18 billion at an annual rate, the government said. The storm affected 24 states, with the most severe damage in New York and New Jersey.

Consumers may also be scaling back on spending because of fears about the "fiscal cliff," the automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal by then.

"The upshot is that although both incomes and spending will probably bounce back in November, the underlying trend is weak," said Paul Dales, senior U.S. economist at Capital Economics.

The depressed spending figures suggest that the economy is growing more slowly in the October-December quarter than it did in the July-September quarter. Dales predicts U.S. economic growth will tumble from the 2.7 percent annual rate in the July-September quarter to a weak 1 percent in the October-December period. That's too low to lower the unemployment rate, now at 7.9 percent.

After-tax income adjusted for inflation fell 0.1 percent in October. And spending, when adjusted for inflation, dropped 0.3 percent — the biggest such decline in three years.

The saving rate edged up slightly to 3.4 percent of after-tax income in October, compared with 3.3 percent in September.

Many economists say growth will rebound in 2013 once the rebuilding phase begins in the Northeast.

And if President Barack Obama and Congress can reach a budget deal to avoid the fiscal cliff, some economists, including Federal Reserve Chairman Ben Bernanke, are predicting a strong year for the economy.

Still, the storm's impact has slowed sales in the nation's most densely populated region ahead of the crucial holiday shopping season.

The International Council of Shopping Centers said 18 major retailers reported that sales rose 1.7 percent in November, compared with the same period a year ago. The group had been expecting sales growth of between 4.5 and 5.5 percent.

The economic damage from the storm may be starting to fade, though. Retailers are reporting solid sales over the Thanksgiving Day holiday weekend.

And applications for unemployment benefits have fallen from an 18-month high in the first week of November. That surge was driven by applications in New York, New Jersey, Pennsylvania and Connecticut.

Still, the increase in unemployment applications earlier in November will probably depress job growth for the month. Many economists predict that net job growth for November will range between 25,000 and 75,000 — well below the 171,000 jobs that were added in October.

Sandy slowed U.S. consumer spending and pay in October 11/30/12 [Last modified: Friday, November 30, 2012 8:50pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Indian automaker plant is latest sign of Detroit comeback

    Autos

    It has been years since Detroit, birthplace of the American auto industry, was a steady producer of the manufacturing jobs that defined it as the Motor City. But its comeback is entering a new phase.

    Starting next year, Mahindra Group of India will make vehicles at Detroit’s first new vehicle assembly plant in 25 years.
  2. Big Tobacco's anti-smoking ads begin after decade of delay

    WASHINGTON — Decades after they were banned from the airwaves, Big Tobacco companies return to prime-time television this weekend — but not by choice.

    Cigarette butts discarded in an ashtray outside a New York office building. Decades after they were banned from the airwaves, Big Tobacco companies are returning to prime-time television, but not by choice. Under court order, the tobacco industry for the first time will be forced to advertise the deadly, addictive effects of smoking, more than 11 years after a judge ruled that the companies had misled the public about the dangers of cigarettes. [Associated Press]
  3. A new threat this shopping season: toys that can spy on kids

    Retail

    ST. PETERSBURG — Not all sinister toys are as obvious as a Chucky doll. Many present more subtle threats — choking hazards, high lead content, privacy concerns. And as the biggest shopping season of the year kicks off, consumer advocates are urging shoppers to be judicious when choosing gifts for children …

    A doll called “My Friend Cayla” presents privacy concerns because of its unsecured Bluetooth connection and ability to record audio, according to consumer advocates who on Tuesday released their annual “Trouble in Toyland” report ahead of the holiday shopping season. [DIRK SHADD   |   Times]
  4. Copa Airlines to fly daily nonstop from Tampa to Panama next summer

    Airlines

    TAMPA — Panama's Copa Airlines, which four years ago became the first airline to offer service between Panama and Tampa Bay, said it is increasing its nonstop service between Tampa International Airport and Panama City to daily flights starting in July 2018. Expanded Copa service will grow from four days a week to …

    Copa Airlines is increasing its flights starting in July from Tampa to Panama. In this 2013 photo, Tampa International Airport CEO Joe Lopano, Florida Gov. Rick Scott, Panama Vice Minister of Tourism Ernesto Orillac  and Copa CEO Pedro Heilbron each talked about what Copa Airlines would mean to Tampa and Panama when they start non stop flights in December 2013. Many of those goals have been realized. [SKIP O'ROURKE  |  Times]
  5. Irma did not stop tourists from setting record visits to Florida so far in 2017

    Tourism

    Despite Hurricane Irma, Florida hit another record high number in tourists visiting the state in the first nine months of this year, according to figures released this week.

    Florida tourism continues to set records through the third quarter of this year. 
Busch Gardens remains a big visitor draw in the Tampa Bay market. In photo, Busch Gardens CEO Stewart Clark posed earlier in 2017 for a portrait in Tampa. [CHARLIE KAIJO   |   Times]