By Timothy R. Homan Oct. 30 (Bloomberg) -- Spending by U.S. consumers fell in September for the first time in five months after the government’s auto-rebate program expired. The 0.5 percent decrease in purchases matched the median estimate of economists surveyed by Bloomberg News and followed a 1.4 percent jump in the prior month, Commerce Department figures showed today in Washington. Incomes were unchanged, while the savings rate climbed. Stagnant wages and concern over mounting unemployment are causing confidence to wane, raising the risk that consumers will retrench in coming months as government assistance programs such as the so-called cash-for-clunkers plan expire. The report also showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rate low. “September as a total was quite weak, but a lot of that can be traced to autos,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “Government assistance has probably taken consumers about as far as they can go.” The median forecast for spending reflected responses from 75 economists surveyed. Projections ranged from a decline of 0.9 percent to a gain of 0.5 percent. The government revised the August reading up from an originally reported increase of 1.3 percent. Wages and salaries dropped 0.2 percent after a 0.2 percent gain the prior month as job losses mounted. Fed Pledge Fed policy makers, who have said they’d keep the benchmark lending rate near zero “for an extended period,” are trying to secure an economic recovery alongside an eventual withdrawal of fiscal and monetary stimulus in time to avoid driving inflation and borrowing costs higher. Today’s report showed inflation held below the Fed’s long- term forecasts. The price gauge tied to spending patterns fell 0.5 percent from September 2008. The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent from the previous month and was up 1.3 percent from a year earlier, matching the 12-month gain in August that was the smallest since 2001. Adjusted for inflation, spending dropped 0.6 percent following a 1 percent increase in August. The decrease in spending pushed the savings rate up to 3.3 percent last month from 2.8 percent. Less Income Disposable income, or the money left over after taxes, was unchanged after rising 0.1 percent the previous month. Adjusted for inflation, disposable income dropped 0.1 percent. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, fell 7.2 percent last month after increasing 6.7 percent in the prior month. Autos in October probably sold at a 9.85 million pace, down from an average 11.5 million rate in the third quarter than reflected the boost from ‘cars-for-clunkers,’ according to the median estimate of analysts surveyed by Bloomberg News. Purchases averaged 13.15 million in 2008. Consumer purchases of non-durable goods increased 0.5 percent, and spending on services, which account for almost 60 percent of all outlays, rose 0.1 percent. Kellogg Co., the largest U.S. breakfast-cereal maker, yesterday reported third-quarter profit that exceeded analysts’ estimates as costs fell more than sales. “Consumers remain nervous and are more value conscious than they were a couple of years ago,” Chief Executive Officer David Mackay said in a telephone interview. “We have to be pragmatic about consumers and the issues and pressures they face, and try to help them in any way we can.”

Source