In the latest Econoblog, Barry Ritholtz and Andrew Samwick debate how long consumer spending can hold up, but the answer is at least through last last July. From MarketWatch:
U.S. consumers spent more than they earned in July for just the second time in the last 46 years, the Commerce Department said Thursday.
Personal incomes increased 0.3% in July, while spending soared ahead by 1%. As a result, the personal savings rate tumbled to negative 0.6%, the lowest since monthly records began in 1959. Read the full report.
There is every indication that not much has changed since mid-summer. From CNNMoney:
Retailers racked up solid sales [in August], proving once again that American consumers are holding tough despite soaring oil and gasoline prices.
"I am very perplexed by these results," said Ken Perkins, retail analyst and president of research firm Retail Metrics."I had expected 50 percent of the 64 retailers that we track would have missed their sales forecasts. But two-third of that universe have beat so far."
Perkins had estimated an overall 3.7 percent same-store sales growth in August. "That number may go up to 3.9 percent growth now."
Regarding that low savings rate, General Glut says I told you so, and Kash joins with Andrew and Barry in wondering about the sustainability of consumer spending. The betting, of course, is that recent developments will put a dent in the pace of household consumption expenditures. From Reuters:
But Hurricane Katrina -- which swept through the southern United States earlier this week, flooding the city of New Orleans, killing hundreds and halting economic activity in the region -- is expected to hurt sales for September and beyond...
Thomas Filandro, an analyst at Susquehanna Financial. "The big question mark is what impact fuel costs will have."
OK, but it is worthwhile to note that a slowdown in spending does not necessarily mean saving rates will rise, as one might suspect the impact of Katrina and rising fuel costs to have a negative effect on income as well (at least temporarily).