Consumers keeping cash close to the vest

Consumer spending declined 0.3% in September in yet another sign that the economic slump is battering consumers, according to the Department of Commerce.
OCT 31, 2008
Consumer spending declined 0.3% in September in yet another sign that the economic slump is battering consumers, according to the Department of Commerce. The decline in spending, which was in line with analysts' estimates, was the largest since June 2004 and followed two consecutive flat months: July and August. Personal-consumption expenditures inched up 0.1% in September. Excluding food and energy prices, the index increased 0.2%. "People are pulling back on consumption, and this means that the economy is going to be slow for a while," said Jay Mueller, senior portfolio manager at Wells Capital Management of San Francisco, which has $250 billion in assets under management. "People see the bad headlines and the gyrations in the financial markets, and they are going to want to keep cash close to home. The falling consumption is a piece of the overall deleveraging theme that we will see in the upcoming months." Meanwhile, incomes increased 0.2% in September, compared with a 0.4 increase in August. That’s partly because of the fallout of Hurricane Ike, which hit the Gulf Coast on Sept. 13. The storm cut rental payments and earnings from businesses that were affected by the tumultuous weather. On Wednesday, the Federal Reserve cut the federal funds rate by half a percentage point to 1%, noting that the "financial market turmoil is likely to exert additional restraint on spending." Gross domestic product fell 0.3% in the third quarter in the most telling sign that the economy is falling into a recession. Two consecutive quarters with a negative gross domestic product is defined as a recession.

Latest News

Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up
Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up

Shareholder targets FS KKR Capital's directors over alleged portfolio valuation and dividend missteps.

UBS loses $1.2 million arbitration claim linked to variable annuities and margin
UBS loses $1.2 million arbitration claim linked to variable annuities and margin

UBS has a history of costly litigation stemming from the sale of volatile investment products.

'We are monitoring the situation,' SEC says of private funds
'We are monitoring the situation,' SEC says of private funds

New director David Woodcock puts firms on notice over fees, conflicts, and liquidity risk as private credit shows signs of stress.

Separating math from emotion key to a successful retirement, says JPMorgan
Separating math from emotion key to a successful retirement, says JPMorgan

Advisors can help “separate the math from the emotion” when it comes to retirement, says JPMorgan’s Michael Conrath.

Nitrogen launches Legacy Center to close generational wealth transfer gap
Nitrogen launches Legacy Center to close generational wealth transfer gap

New product gives advisors a structured way to introduce themselves to clients' heirs before assets change hands.

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline

SPONSORED The barbell era: How ultra-wealthy investors are positioning for what comes next

Ultra-high-net-worth investors aren’t retreating from risk. They're redefining it, balancing safety with selective conviction