WASHINGTON (AP) — US consumers and businesses spent cautiously last month, a sign that strong growth during the spring and summer may decelerate in the final three months of the year.
The figures released Wednesday were a mild disappointment after data the previous day showed the economy had expanded at the fastest pace in over a decade in the second and third quarters.
“The economy is poised to slow again as we move into the fourth quarter, after a stellar catch-up from last year’s horrific winter weather,” said Diane Swonk an economist at Mesirow Financial.
Consumers opened their wallets a bit in October, boosting their spending by a lukewarm 0.2 per cent. That was only slightly better than September’s flat reading.
Yet incomes also rose just 0.2 per cent, matching September’s increase. Because hiring has been healthy this year, many economists have been expecting a stronger pickup in income. Limited increases in pay could restrain future spending by consumers, which accounts for 70 per cent of the US economy.
Businesses also cut back on orders for industrial machinery, computers and other equipment, a sign that business investment spending may slow in the October-December quarter. Factories received fewer orders for the second straight month in a key category that tracks business investment plans.
Paul Ashworth, an economist at Capital Economics, said he now expects the economy will expand at a 2.5 per cent annual rate in the fourth quarter, down from an earlier forecast of 3 per cent.