Spending Falls as Car Sales Dip : 0.9% Drop in Rate Biggest in 25 Years
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WASHINGTON — Americans’ personal spending plummeted 0.9% last month, the biggest rate of decline in almost 25 years, the government reported today.
The Commerce Department attributed the big plunge to a drop in car sales following an auto-buying binge in August and September.
Personal income rose 0.4% in October, the best gain since a 1% rise in April.
The big spending spurt in August and September had left consumer debt levels at a record high and the personal savings level at a record low. Given those two factors, analysts had predicted that spending would slow sharply as consumers take a breathing spell.
This slowdown is expected to have adverse affects on the overall economy. Since consumer spending makes up almost two-thirds of the gross national product, many analysts are predicting extremely weak growth in coming months.
The government reported Wednesday that the GNP grew at a 4.3% annual rate this past summer, the fastest pace in more than a year.
The 0.9% drop in the spending rate matched a 0.9% decline in February, 1984, and was the largest since a 1.2% plunge in December, 1960.
The October fall followed strong gains of 1.2% in September and 1.1% in August.
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