Figures released by the US Commerce Department show that consumer spending rose again in August, buoyed by tax rebates.

Expenditure increased 0.2% for the second month in succession, while disposable incomes (the amount left after tax) jumped 1.9%, following a 1.7% rise in July, boosted by tax cuts and rebates.

However, personal incomes, reflecting wages, interest and benefits, stayed flat, the poorest income growth since January 1994, due to weakness in the labour market.

It had been hoped that the continued strength of consumer spending would prevent the US economy falling into recession and prompt a swift recovery [WAMN: 11-Sep-01]. Unfortunately, a month is a long time in economics, and the uncertainty surrounding consumer confidence and expenditure following September’s terrorist attacks has heightened fears of an imminent recession.

News source: New York Times