October 1, 2009

Consumer spending jumped in August

The U.S. Commerce Department said Tuesday that the cash for clunkers car rebate program pushed personal spending in August up 1.3 percent.

Income rose 0.2 percent in the month, but consumer spending on durable goods -- items expected to last three years or more -- rose 5.8 percent, compared to a 1.8 percent rise in July.

The difference, the government said, was the cash for clunkers program that provided federal rebates of up to $4,500 for consumers trading in used cars for new models with higher fuel efficiency.

Non-durable goods spending increased 1 percent in the month, the Bureau of Economic Analysis said.

Disposable income rose 0.1 percent in August.

In the U.S., consumer spending makes up about 70 percent of the gross domestic product, making the figures released Thursday critical to economic forecasts, although less important to market movement, as a variety of other reports monitor consumer activity.

But the number is potentially ominous, as the cash for clunkers program has ended. With unemployment high, the consumers' ability to contribute to an economic recovery may be flattening.