Ahead of the Bell: Personal spending

Consumer spending expected to dip in September as auto sales fell; incomes likely flat

• On 6:29 am EDT, Friday October 30, 2009

WASHINGTON (AP) -- Consumer spending likely fell in September, as auto sales took a nosedive with the end of the popular Cash for Clunkers program.

While consumer spending actually powered a return to economic growth in the third quarter, the concern is that a broad recovery could falter in the months ahead if such spending, which accounts for 70 percent of economic activity, wanes.

Economists surveyed by Thomson Reuters expect consumer spending dropped 0.5 percent last month, following a 1.3 percent surge in August.

A large reason for the pessimism is that incomes are not keeping up with inflation amid a continued wave of job layoffs that has robbed households of needed pay checks. Personal incomes are expected to be flat in September after edging up just 0.2 percent in August.

The Commerce Department is scheduled to issue the report at 8:30 a.m. EDT Friday.

The government reported Thursday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.5 percent in the July-September quarter, signaling that the worst recession since the 1930s has ended.

But many analysts believe the GDP gain could turn out to be the best showing for the economy for some time, especially if consumers grow fearful as they watch unemployment, already at a 26-year high of 9.8 percent, keep rising.

Some analysts believe that consumer spending will slow from a growth rate of 3.4 percent in the third quarter to about half that in the current quarter. If that occurs, the overall GDP growth rate also will slow sharply.

Outside of autos, there were signs of strength in consumer spending in September. Nationwide retailers reported sales growth at stores open at least a year compared with activity in September 2008, the first annual rise in such sales after more than a year of declines, according to data from the International Council of Shopping Centers and Goldman Sachs.

Kohl's Corp. department store chain and Limited Brands Inc. reported their sales rose. J.C. Penney Co., Macy's Inc. and Target Corp. reported their same-store sales fell in September, although not as much as had been expected.

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