What happened
U.S. personal spending fell 0.3 percent in September, a bigger drop than expected and a bookend to the weakest quarter in three decades. The numbers suggest that the economy will slump further in coming months. “Consumers have thrown in the towel,” said Nariman Behravesh, chief economist at IHS Global Insight. (Bloomberg)
What the commentators said
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So “the long-feared capitulation of American consumers has arrived,” said Paul Krugman in The New York Times. Since “American consumers almost never cut spending,” this is a big deal. And the timing of their “new sobriety is deeply unfortunate.” Sure, Americans have been living beyond their means, but saving now could hurt everybody.
A lot of the drop in consumer spending is tied to the slide in home values, said the Los Angeles Times in an editorial. And although it isn’t a popular idea, “to put it mildly,” we probably need to bail out struggling homeowners. Like the other recent bailouts, it’s a case of having to intervene “when the market can’t help itself.” Call it “a bailout in every pot.”
Well, there is some good news for consumers, said Myra Saefong in MarketWatch. Gas prices “have dropped every day for the past six weeks,” and that could have wider effects on the economy. People are more likely to travel, gas stations are more likely to stay in business, and “consumers are just a little bit happier.” It won’t save us, but it could help.
