Evidence of a recession piled ever higher on Friday, with new figures showing Americans are spending less and gloomy about the economy.
The Commerce Department reported consumer spending dropped a sharp 0.3 percent in September while consumer incomes, the fuel for future spending, managed only a small 0.2 percent gain.
That followed a report a day earlier that the US economy shrank by 0.3 percent in the third quarter. The accepted definition of a recession is two straight quarters of a shrinking economy.
A separate survey released on Friday by the University of Michigan and Reuters showed consumer confidence fell last month to 57.6, the biggest one-month drop in the survey’s history, which dates to 1978.
And economists expect Americans to cut back further. The nation’s financial outlook is dimming just as the critical holiday shopping season looms, and stores are bracing for one of the worst on record.
David Wyss, chief economist at Standard & Poor’s in New York, said he believed the recession could turn out to be the longest in the post World War II period.
“Things are still looking soft and the light at the end of the tunnel is a long way off,” Wyss said.
In a separate report, the Labor Department said the wages and benefits of US workers rose by a modest 0.7 percent in the third quarter, the same as in the first and second quarters.
The spending report showed that an inflation gauge tied to spending edged up just 0.1 percent in September. But prices over the past year are up by more than 4 percent, and inflation is outside the Fed’s comfort zone.
Still, the central bank is expected to focus on fighting to keep the country out of a severe recession.
The Fed cut a key interest rate by a half-point on Wednesday to 1 percent, tying the lowest level in the past half-century.
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