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Spending Up, Disposable Income Down

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In the months of July through September, consumers spent three times as much as they did in the year’s second quarter, helping fuel a 2.5% rate of growth in the economy, according to a report from the U.S. Department of Commerce. Taken with news of an agreement to address the debt problem in Europe, the report “cheered markets and reaffirmed most economists’ conviction that the U.S. isn’t sinking back into recession,” The Wall Street Journal reports.

Nevertheless, just because consumers are spending more money doesn’t mean they’re making up for it with their income. Personal income increased by a rate of just 0.1 percent. Adjusted for inflation, disposable income fell for the third consecutive month in September, taking a 0.1 percent dip, as AFP points out. (In August it had dropped more dramatically, by 0.4 percent).

Having earned less, people are spending at the expense of savings, which dropped to a rate of 3.6 percent. The Associated Press notes that this is the lowest rate since December 2007, the beginning of the Great Recession.

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