Consumer spending edges up

08.28.09
By Lewis Green

Americans may not be reaching for their credit cards to make discretionary purchases, but spending did rise slightly during July, according to new figures from the Commerce Department.

Consumer spending ticked up 0.2 percent during the month, largely due to the effects of the government's Cash for Clunkers program, the Wall Street Journal reports.

Spending on durable goods - a category that covers long-lasting goods such as cars - rose by 1.3 percent last month.

Meanwhile, the data showed that personal income remained flat in July, which may affect how much people can devote toward paying off credit card debt.

When they do find some extra cash, Americans seem to be putting a large proportion into savings, as the country's personal savings rate hit 4.2 percent last month, after a reading of 4.5 percent in June.

This is the third month in a row that spending has risen, but does this mean consumers are feeling more positive about the economy?

According to the most recent Conference Board Consumer Confidence Index, the answer could be yes. The index for overall confidence in August stood at 54.1, up from 47.4 in July.

People felt more optimistic about both the current situation and future prospects. The Present Situation Index rose from 23.3 to 24.9, while the Expectations Index increased from 63.4 to 73.5.

Lynn Franco of The Conference Board Consumer Research Center suggested sentiment may be "back on the mend."

However, she cautioned that "as long as earnings continue to weigh heavily on consumers' minds, spending is likely to remain constrained."

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Spending rose slightly in July.