Death of Consumption

We’ll have to wait until the end of October to hear anything officially from the government about what’s happening with the economy during the third quarter, but economic growth during July-August-September isn’t looking too good at the moment.

Last quarter’s real GDP figure of 3.3 percent was driven largely by trade – some 3.1 percentage points were a result of rising exports and falling imports – and, while personal consumption rebounded a bit from prior quarters, it looks like it’s about to reverse course in a big way.

This story from Bloomberg fills in the details:

Consumer Spending in U.S. to Stall, Hurting Growth

Sept. 10 (Bloomberg) — A record spending spree by U.S. consumers will come to an abrupt end this quarter as job losses cause Americans to restrain purchases, a Bloomberg News survey predicts.
Personal spending, the biggest part of the economy, will stall from July to September, three months earlier than predicted last month, according to the median estimate of 49 economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter’s pace.
…
The job market is sending the surest signal the economy is contracting. Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage points from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week.

“There will shortly be a sea change in the consensus economic outlook for early next year, and it won’t be an upward revision,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, who forecast spending would drop this quarter and next and the economy would shrink in the last three months of 2008. “Too many households are just one job loss away from default and foreclosure.”