Higher Gas Costs Push U.S. Consumer Spending Up

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gas pricesBy MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - Americans boosted their spending in August even though their income barely grew. Much of the spending increase went to pay higher gas prices, which may have forced consumers to cut back elsewhere.

The Commerce Department said Friday that consumer spending rose 0.5 percent in August from July. It was the biggest jump since February.

Gas prices rose nearly 50 cents per gallon in July and August, but have since leveled off. Excluding the impact of higher gas prices and other price gains, spending ticked up only 0.1 percent last month.

Income grew only 0.1 percent, too. But after accounting for inflation and deducting taxes, income actually fell 0.3 percent - the poorest performance since November.

The increase in prices and slower growth in pay forced people to save less.

"The US personal income and spending data for August are worse than the headline figures suggest and indicate that subdued jobs growth is hitting incomes," said Paul Dales, senior U.S. The increase "was largely due to extra spending caused by the surge in gasoline prices."

High unemployment and weak wage growth have kept Americans from spending more freely, which has held back growth. Consumer spending drives nearly 70 percent of economic activity.

The economy grew at an annual rate of 1.3 percent in the April-June quarter, the government reported Tuesday. Most economists say growth rate will likely hover around 2 percent in the July-September quarter, a rate that is far too weak to lower the unemployment rate.

"American household spending and income remain weak, indicating continued subpar growth," said Sal Gautieri, senior economist at BMO Capital Markets.

The combination of weak income growth and a big jump in spending meant that households saved less. The saving rate dropped to 3.7 percent of after-tax income in August, down from 4.1 percent in July.

A price gauge tied to consumer spending jumped 0.4 percent, reflecting the rise in energy prices. It was the biggest one-month jump since March 2011. Excluding food and energy, prices barely changed. Over the past year, prices excluding food and energy rose only 1.6 percent, well below the Federal Reserve's 2 percent inflation target.

Earlier this month, the government released a mixed report on retail spending that showed that consumers are feeling pinched by higher gas prices.

Consumers spent 0.9 percent more at retail businesses in August from July. But excluding the impact of gas prices and a sizeable increase in auto sales, retail sales rose just 0.1 percent. The retail sales report showed Americans cut back on clothing, electronics and at general merchandise outlets.

There have been some positive signs that spending could pick up in September, most notably a pair of positive consumer confidence surveys released this week.

The University of Michigan's index released Friday showed consumer sentiment rose this month to its second-highest level in nearly five years. A separate survey from the Conference Board said consumer confidence jumped in September to its highest level since February.

Stock prices are higher. Steady gains in home prices, along with record-low mortgage rates, have helped fuel a modest recovery in the housing market.

And a report Thursday offered some hope that the job market will strengthen. Weekly applications for unemployment benefits plunged 26,000 to a seasonally adjusted 359,000. That's the lowest level in two months.

Still, most economists expect only modest hiring gains when the government releases the September employment report next week. The forecast is that employers added roughly 100,000 jobs, about the same as in August.

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papadb24

The Food Stores with Smaller Packaging, and much Higher Prices never seem to mentioned either?
More Cheer leading by Huffy Post. And posting and rating comments that are positive to the Cause!

October 02 2012 at 9:25 AM Report abuse rate up rate down Reply
papadb24

The Food Stores with Smaller Packaging, and much Higher Prices never seem to mentioned either?
More Cheer leading by Huffy Post. And posting and rating comments that are positive to the Cause!

October 02 2012 at 9:21 AM Report abuse rate up rate down Reply
papadb24

The Food Stores with Smaller Packaging, and much Higher Prices never seem to mentioned either?
More Cheer leading by Huffy Post. And posting and rating comments that are positive to the Cause!

October 02 2012 at 9:21 AM Report abuse rate up rate down Reply
jdykbpl45

Obama, Biden, Pelosi, Reid. Lies, no hope, no change, higher and higher gas, coming inflation.

September 30 2012 at 2:11 PM Report abuse -2 rate up rate down Reply
jdykbpl45

Obama, Biden, Pelosi, Reid. Lies, no hope, no change, higher and higher gas, coming inflation.

September 30 2012 at 2:11 PM Report abuse -2 rate up rate down Reply
thedukeoforange2

.Republicans vote to continue outsourcing jobs overseas
===================================================================================
Republicans today stopped a vote that would end the tax breaks for corporations who outsource jobs to other countries. With the economy and jobs being the number one concern for Americans, the Republican obstructionists in Congress continue to support Wall Street and say no to Main Street.


For several years, we the Tax payer have been giving tax breaks to corporations for shipping American jobs to other countries. The Democrats had proposed a Bill that would end that tax break and give a tax credit to those who create jobs here in the USA, but the Republicans said, “no”.


Yesterday, the Republicans in Washington prevented Congress from getting subpoena power to investigate BP’s oil spill. They obviously do not care that 11 people were killed on the oil rig or care about the oil spill itself. Rep. Joe Barton even apologized to BP earlier this year, and several Republicans have gone after President Obama for making BP pay for the spill and clean up with a $20 billion fund for those affected by the spill.


Today the Republicans stand with outsourcing jobs to other countries. The Republican Party has voted against every jobs Bill since President Obama took office, and Tea Party Folk blame the democrats for the lack of jobs.


Last week the Republicans took a stand on the Bush tax cuts saying that unless the tax cuts for the rich are extended, the tax cuts for the middle class and the poor will end.


Republicans last year said that they planned on slowing the economic recovery for our country in order to campaign against a bad economy, well they have succeeded.

The Republican “Party of No”, no jobs, no recovery, no health care, just say no.

September 30 2012 at 9:38 AM Report abuse +3 rate up rate down Reply
3 replies to thedukeoforange2's comment
s.kohanski

OBAMA SUCKS, IT'S TIME FOR A NEW PRESIDENT THAT CARES ABOUT AMERICA !

September 29 2012 at 9:40 PM Report abuse -2 rate up rate down Reply
nj666

You know that you aren't telling the truth. This administration never tells the truth. You must be a paid writer for Obama. We all know after four years. B O stinks

September 29 2012 at 6:04 AM Report abuse -3 rate up rate down Reply
thedukeoforange2

Here I thought the republicans wanted to cut spending, here they added $21 billion dollars to our national debt by giving away corporate welfare to BIG OIL companies for the next 10 years. What a bunch of HYPOCRITES!

September 28 2012 at 4:53 PM Report abuse +2 rate up rate down Reply
thedukeoforange2

.Republicans increase deficit, block removal of tax subsidies for oil companies
====================================================================================
Washington, D.C. - Tuesday evening Republicans in the U.S. Senate succeeded in their mission to block Democratic attempts to remove $21 billion in subsidies which the five largest oil companies presently receive from U.S taxpayers.

By blocking this legislation, the Republicans once again have increased the deficit and in turn they have increased the national debt.

The cloture vote for the Close Big Oil Tax Loopholes Act had 52 yeas and 48 nays. A cloture vote needs a total of 60 votes before moving to the final simple majority vote.

Joining the Republicans in the nay vote against removing the tax loopholes of the oil companies were Democratic Senators Mark Begich of Alaska, Mary Landrieu of Louisiana, and Ben Nelson of Nebraska.

Joining the Democrats in support of the removal of tax loopholes were Republican Senators Susan Collins and Olympia Snowe, both from Maine.

Independent Senators Joe Lieberman of Connecticut and Bernie Sanders of Vermont also voted yea for the removal of the loopholes.

The five oil companies which would have been affected by the bill are BP, ConocoPhillips, Chevron, Exxon Mobil, and Shell, removing $21 billion in tax breaks over a ten year period.

According to The Hill, stating the need to apply the savings to lowering the deficit, Democrats plan to continue to push for the removal of the subsidies as they continue talks with the GOP on the 2012 federal budget and the on the debt ceiling debate.

Senator Majority Leader Harry Reid (D-NV) told reporters after the vote, “I am confident that before we finish our budget negotiations here in anticipation of raising the debt ceiling that that will be part of it.”

Even after oil companies continue to make record profits off of the American people, subsidies to these companies are set to continue indefinitely into the future costing the taxpayers billions of dollars. Despite record profits and billions in subsidies, oil companies continue to overcharge as for gasoline and other products critical to the lives and the economy of Americans and America.

..

September 28 2012 at 4:23 PM Report abuse +4 rate up rate down Reply
1 reply to thedukeoforange2's comment
thedukeoforange2

I hope you right wing nut jobs like paying $21 billion dollars worth of taxpayers subsidies to BIG OIL companies for the next 10 years. Obama wanted to end this taxpayer (corporate welfare) give away but the republicans blocked it! Enjoy the pain at the pump you fools!!!!!!

September 28 2012 at 4:28 PM Report abuse +7 rate up rate down Reply
2 replies to thedukeoforange2's comment
thedukeoforange2

Go drink some more of your spiked tea, tea bagger.

September 28 2012 at 4:40 PM Report abuse +2 rate up rate down
nj666

Put the blame for high gas prices where it belongs Obama's E P A. You also forgot to mention that the oil companies pay the highest amount of taxes. More than any other industry

September 29 2012 at 6:01 AM Report abuse -1 rate up rate down