Property Grunt

Tuesday, October 31, 2006

Trick of Treat: Now I am confused

As we have all heard incomes have risen. However intially it was stated that spending was restrained.

Americans’ incomes rose last month at the quickest pace since June, but consumers did not respond by rushing out to splurge as gasoline prices fell from their summer peak. Instead, they spent at about the same pace and put more money aside. As a result, the nationwide personal savings rate came the closest it has in a year and a half to climbing out of the red.

The Commerce Department reported yesterday that personal income in September increased at a seasonally adjusted annual pace of 0.5 percent, compared with 0.4 percent in August. Personal consumption spending, meanwhile, rose 0.1 percent in September after a 0.2 percent increase in August.

But another article states the exact opposite and that spending has increased.

WASHINGTON ( Reuters) - U.S. consumers, helped by bigger paychecks and lower gasoline prices, boosted their spending last month, according to a government report that may counter fears of a sharp economic slowdown.

The Commerce Department said on Monday that personal income rose by 0.5 percent in September, ahead of analysts' forecasts for a 0.3 percent gain. The August figure revised upward to 0.4 percent.

Taking out inflation and taxes, real disposable income rose at its fastest pace in a year in September at 0.8 percent, helping to pad consumer spending at a time when concerns are growing about the economic impact of the housing slump.

Who do I believe? I am going to side with the former. With the housing market dragging everything down and people are overleveraged with ARMs or interest only mortgages, people are searching underneath every couch cushion to pay everything off.

We also have to account for the frugal sector. This is the faction that have maintained an ant philosophy while watching the grasshoppers run around and play. These are the people who were saving and putting their money into to safe investments that have provided a consistent return.

And if the Democrats gain control of the House, well I wouldn't be surprised if consumer spending is further restrained.