Business

US personal income falls unexpectedly in September

Shoppers at a Wal-Mart store in Duarte, California
Image caption Americans cut back on their savings as consumer spending continued to grow despite falling incomes

US personal income registered an unexpected fall in September, while consumer spending was also weak, data from the Commerce Department shows.

Households saw their earnings fall at an annualised rate of 0.1% compared with August, the largest fall in personal income in 14 months

In August, incomes rose by a revised 0.4%.

The market is expecting that the Federal Reserve will announce a new round of quantitative easing this week.

Analysts had expected earnings to rise by 0.3%.

The fall in personal income was mainly driven by lower benefit payments, following the temporary rise in benefits during August due to emergency unemployment insurance legislation passed by Congress.

Dipping into savings

Consumer spending still rose by an annualised 0.2%, according to the new data, indicating that Americans cut back on their savings - to 5.3% of their income, from 5.6% in August - in order to maintain their spending.

The US savings rate has hovered around 5.5%-6% since the depth of the recession at the beginning of 2009, having risen from a low of just over 1% in the middle of the boom in 2005.

But the increase in consumption was slower than the 0.5% recorded in the last two months, and also below the 0.4% expected by the markets.

The new figures will not greatly affect analysts' views on the overall performance of the US economy during September, as GDP figures for the third quarter of the year were released last week.

Market reaction was muted, with the dollar almost unchanged against the euro immediately following the data release.

However, analysts say the data does reveal a sharper slowdown than expected in consumer spending that could be a drag on growth during the remainder of the year.

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