Published: October 30, 2009 10:00 am      

Consumer spending falls 0.5 percent in September

WASHINGTON — Consumer spending plunged in September by the largest amount in nine months, reflecting the end of the government's Cash for Clunkers auto sales program. Incomes, the fuel for future spending, were flat.

While the government reported that the overall economy grew in the July-September period, signaling the end of the worst recession in seven decades, the weakness in spending and incomes as the quarter ended underscores the fragility of the recovery.

The Commerce Department said Friday that spending dropped 0.5 percent in September, matching economists' expectations. Personal incomes were unchanged as workers contend with rising unemployment and a squeeze on wages.

Economists worry that the recovery could falter in coming months if households cut back on spending to cope with rising unemployment, heavy debt loads and tight credit conditions.

The concern is that much of third-quarter growth stemmed from temporary government programs such as the clunkers sales incentives that ended in August.

The government said Thursday the gross domestic product, the broadest measure of economic health, expanded at an annual rate of 3.5 percent in the third quarter, the first increase after a record four straight declines. A 3.4 percent rise in consumer spending, which accounts for 70 percent of total economic activity, powered the gain.