While incomes grew at an expected 0.4% MoM, US consumers spent at an exuberant 1.0% MoM clip - the biggest monthly rise since Aug 2009 (cash for clunkers). To cover this spending surge, the savings rate tumbled.
The last time - Aug 09 - that spending surged like this was when the government unleashed 'cash for clunkers', it plummeted the following month...
Spending on durable goods rose 3.5 percent after adjusting for inflation after a 1.4 percent decline in August.
Outlays on services rose 0.3 percent, while spending on non- durable goods also advanced 0.3 percent.
Under the hood, the PCE Deflator printed as expected +1.6% YoY.
Private workers wage growth continues to outstrip government workers' wage growth YoY and upticked in September...
And while outgoings surged with relatively flat incomes, the savings rate plunged to its lowest since Dec 2007 to enable the spending...which just happens to be when the last recession started.
As Bloomberg warns, the jump in September outlays was driven by purchases of durable goods including the replacement of motor vehicles lost in recent flooding from hurricanes. That means the latest surge probably overstates the strength of consumer spending.