Economic Watch: Personal Spending, Income, Consumer Sentiment Higher

September 29, 2014

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Personal spending in the U.S. increased 0.5% in August from the month before, according to a new Commerce Department report. The hike follows a flat performance in July, while the annual rate over the previous three months has slowed from a 4.2% increase to a 3.8% gain.

Personal income in August increased 0.3% following a 0.2% improvement in July.

Both August performances were in line with expectations from many economists.

“Consumers remain under pressure amid lackluster income growth, although at least temporarily lower gas prices are helping to line consumers' pockets, and provide a floor in spending,” said Lindsey Piegza, chief economist at Sterne Agee.

“This modest pace, while still a positive contribution to growth, is far below what is needed [and] expected to absorb the elevated levels of production seen over the past few months. Already inventory to sales ratios are rising noticeably, suggesting an eventual cooling off in manufacturing activity if consumer spending is not ratcheted up significantly and soon.”

Manufacturing activity is a key indicator for freight activity.

The news follows a report from Friday that the U.S. economy expanded in the second quarter at its best pace in more than two years.

Also on Friday a monthly survey showed consumer sentiment was at its highest level in 14 months.

The Thomson Reuters/University of Michigan final index of sentiment increased to 84.6, the same as the preliminary reading, from 82.5 in August.

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