Consumer spending falls

The day after good GDP news we find out that the U.S. consumer, sans economic incentives like “cash for clunkers” and “first time homebuyers tax credits,” wasn’t in the mood to spend money in September. Cash flow was reined in to the tune of 0.5%. That marks the biggest drop since December of 2008. That was in the heart of the recession as the U.S. tightened its collective sphincter.

What it means: As many of us economic, financial types have been saying the recession may be over, but the recovery is going to be slow. However, as not too many of us have been saying, a U.S. consumer that saves for big purchases, rather than uses credit is great for the economy long-term. In that scenario, there is a temporary hiccup in consumer spending while the U.S. consumer first pays off debts and then saves for the big purchase. That is probably a two year period where consumer spending bounces up and down around 0% growth. After that though spending returns. The important difference is that we go from being an indebted nation to being a lender nation. Catbird seat.

Happy Halloween to Everyone! I am going as Pai Mei of Shaw Bros. martial arts fame.

Jason