Corrects references to how long spending on new cars has been increasing and how long prices on used cars have been rising, both in third paragraph. Specifies that Chesborough’s comment in fourth paragraph was made earlier in the week about expected vehicle sales.
Consumers earned more and spent more in September—on things like healthcare, new cars and trucks, and clothes and shoes—the Commerce Department reported Friday.
Personal income increased 0.9% in September, rebounding from a 2.5% dip in August, while expenditures rose 1.4%, the Commerce Department's Bureau of Economic Analysis (BEA) said. Consumers made more money from businesses they owned as well as from wages, which more than made up for a drop-off in government benefits as pandemic recovery payments slowed. The savings rate fell slightly from 14.8% of disposable income to 14.3%, still well above its pre-pandemic rate of 8.3%.
Much of the increase in spending on goods was driven by motor vehicle sales. Spending on new cars and trucks rose for the fifth straight month, climbing 8.7%, while spending on used vehicles rose 4.3%. Used car prices have begun to flatten out after rising dramatically over the summer, according to the Manheim Used Vehicle Value Index.
“Given the severity of the health and economic crisis in the country right now, the strong vehicle sales pace is a pleasant surprise, particularly when six months ago most market observers didn’t expect us to be here,” Charlie Chesborough, senior economist at Cox Automotive, said in a statement earlier in the week about expected vehicle sales figures.”