US personal incomes down $7.3bn

Added by Erik West on September 30, 2011

Incomes in the US fell by US$7.3bn or 0.1% in August – the first time in two years, reported the US Department of Commerce Bureau of Economic Analysis on Friday.

Despite the drop in income, spending was up slightly by 0.1% – primarily the result of higher gas and food prices. Consumer spending was unchanged when adjusted for inflation.

The August savings rate fell to 4.5% – its lowest level in 21 months, a possible indication that people are dipping into their savings to cover higher costs. The savings rate was as high as 6.5% during 2008, yet averaged about 2% before the recession.

The US economy grew an annual rate 0.9% during the first six months of 2011 – the slowest since 2008. Economists are reported to expect slightly better growth in the second half of this year at about 2%.

The US Department of Commerce Bureau of Economic Analysis reported that consumer confidence remained weak, leading to less spending on major purchases like cars, furniture, and appliances.

US stock markets closed down on Friday. The Dow Jones was down 2.16% to 10,913.38; the S&P 500 index was also down by 2.5% at 1,131.42; and the Nasdaq was down 2.63% at 2,415.40 points. For the second quarter of this year all three indices are down by more than 10%, the worst quarter since the beginning of the credit crisis.