Trash piles up outside the Beach Peddler store in Point Pleasant Beach, N.J.(Photo: Natalie DiBlasio, USA TODAY)
WASHINGTON -- Americans cut back on spending in October and saw
no growth in their income, reflecting disruptions from Superstorm Sandy
that could hold back economic growth in the final months of the year.
spending dropped 0.2% in October, the Commerce Department said Friday.
That's down from an increase of 0.8% in September and the weakest
showing since May.
Income was flat in the month following a 0.4% rise in September.
government said work interruptions caused by the storm reduced wages
and salaries by about $18 billion at an annual rate. The storm affected
24 states, with the most severe damage in New York and New Jersey.
may also be worried about automatic tax increases and spending cuts
that will take effect in January if lawmakers and the Obama
administration fail to strike a deal before then.
spending figures suggest economic growth will likely be weak in the
October-December quarter. Consumer spending drives nearly 70% of
Even discounting the effects of Sandy, income
growth would have risen a still weak 0.1%. After-tax income adjusted for
inflation fell 0.1%, while spending adjusted for inflation dropped
The saving rate edged up slightly to 3.4% of after-tax income in October, compared with 3.3% in September.
The government reported Thursday that the economy grew at an annual rate of 2.7%
in the July-September quarter, an improvement from the 2% rate of
growth initially estimated. However, economists believe the acceleration
in activity will be short-lived.
Many of them predict growth is
slowing in the current October-December quarter to less than 2%, a rate
that is too weak to make a significant dent in unemployment. But they
expect growth to rebound in 2013, when the post-Sandy rebuilding phase
begins in the Northeast.
In October, spending at retail business
fell 0.3%, the first drop after three months of gains. Auto sales
dropped 1.5%, the biggest decline in a year.
And sales weren't much better in November,
according to reports from major retailers. The International Council of
Shopping Centers said 18 major retailers reported sales rose 1.7% in
November compared to the same period a year ago. The group had been
expecting sales growth between 4.5% and 5.5%.
Analysts said while
holiday sales got off to a strong start on the Friday after
Thanksgiving, those gains were blunted by weakness in early November
that reflected disruptions caused by Sandy.
Applications for unemployment benefits
rose to an 18-month high in the first week of November, driven by a
surge in applications in New York, New Jersey, Pennsylvania and
Such applications have fallen sharply since. But the
increase earlier this month will likely depress job growth for November.
Many economists predict that net job growth for November will range
between 25,000 and 75,000 - well below the 171,000 jobs added in