Consumption Increases Along With The Modest Rise Of Consumer Income

Online, October 1, 2013 (Newswire.com) - The slight economic growth in the July-September quarter resulted to an increase in the consumption by American consumers. The figures have been contributed by the modest increase in consumer income, which is at its fastest for the last six months.

Recently, the US Commerce Department said that American consumers were spending more on goods and services. In fact, their consumption rose to 0.3% in August, which is one notch higher than the 0.2% in July.

As stated, the increase in spending is seen as an effect of the rise in the income of consumers. The overall income trend rose during the July-August period. The wages of government employees rose by 0.2%, and the salaries of employees in private organisations rose by 0.5%.

The numbers would have been better if not for the $7.3 billion reduction in the salaries of employees due to the government-imposed lay-offs.

People's consumption fuels 70% of the economic performance. Despite the promising figures, many financial experts remain sceptical about the impact of the said development on the country's overall economy, especially in pushing the pace of the 2.5% annual growth rate recorded during the April-June term.

BMO Capital's senior economist Jennifer Lee said, "With more money coming in, consumers spent a little, just a little, more freely."

But consumer confidence also declines due to unprecedented budget policies, which in turn has a considerable effect on the American economy, in general. In a survey done by the University of Michigan, consumers have grown less confident about the country's financial status. In fact, their 85.1% confidence rate in July steadily decreased to 82.1% in August, and to 77.5% in September.

Capital Economic's chief US economist, Paul Ashworth, is optimistic about the performance of the US economy, especially for the recorded 2 to 2.5% annual growth rate as of the July-September quarter. The growth in consumer demands in August also indicates that the economy is getting stronger.

But despite Ashworth's positive remarks, other economists remain doubtful about the growth. For instance, Barclay's economists, Peter Newland, suggests that the increase in income and consumer spending had little effect on the bank's growth predictions, which is at its recent rate at 1.7%.

But despite the different results and trends, American citizens are in a much better position these days in terms of spending patterns. This development is attributed to the decrease in unemployment rate as more companies retain their employees recently. Some analysts stated that approximately 200,000 jobs are created in September, the highest on record since February.

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