As the financial crisis was gaining force, the government said today Americans cut back on their spending in October by the largest amount since the 2001 terrorist attacks.
The Commerce Department reports that consumer spending plunged by 1 percent last month, even worse than the 0.9 percent decline that had been expected.
Personal incomes were up 0.3 percent last month, slightly better than the 0.1 percent gain analysts had expected.
The big decline in spending in October underscored concerns that the economy is falling into a deep recession. Consumer spending accounts for two-thirds of total economic activity.
The government had reported Tuesday that the overall economy, as measured by the gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter. With October’s big drop in spending, the view is that the GDP decline for this quarter will be much steeper, with some analysts projecting the economy will contract at an annual rate of 4 percent this quarter.
Many economists believe the current recession will last through the middle of next year and will be the most severe downturn since the 1981-82 slump. (AP)
