Spending by U.S. consumers unexpectedly declined and incomes stagnated in October as Superstorm Sandy kept some in the Northeast from getting to work or from shopping at malls and car dealerships.
Purchases decreased 0.2%, the weakest reading since May, after a 0.8% gain in the prior month, Commerce Department figures showed today in Washington. The median estimate of 79 economists surveyed by Bloomberg called for no change in so-called nominal sales. Incomes were unchanged, held down by a drop in wages caused by Sandy, Commerce said.
The storm shuttered hundreds of retailers when it made landfall on Oct. 29, temporarily countering the benefit from rising consumer sentiment that has brightened the holiday-shopping outlook. Faster job and wage gains would help stoke household spending after a third-quarter slowdown, helping explain why the Federal Reserve is pursuing policy aimed at spurring employment.
While the Commerce Department said that the storm affected 24 states, it couldn’t precisely quantify Sandy’s total effect on spending and income. Private wages decreased $17.1 billion U.S. in October, and the agency estimated that the storm reduced pay at an annual rate of $18.2 billion U.S. as it interrupted work schedules.
Economists’ spending projections ranged from a drop of 0.2% to a gain of 0.5%
Incomes increased 0.4% in September. Economists projected a 0.2% gain for October, according to the median estimate.
Wages and salaries fell 0.2% in October after a 0.3% gain a month earlier, today’s report showed. The saving rate rose to 3.4% from 3.3%.
