Business

Sandy slowed US consumer spending

WASHINGTON — Americans cut back on spending last month while their income remained flat. The weakness in part reflected disruptions from Hurricane Sandy that could slow economic growth for the rest of the year.

The Commerce Department said Friday that consumer spending dropped 0.2 percent in October. It was the weakest figure since May, and it compared with a 0.8 percent spending increase in September.

Advertisement

Income had risen 0.4 percent in September.

Work interruptions caused by the storm reduced wages and salaries in October by about $18 billion at an annual rate, the government said. The storm affected 24 states, with the most severe damage in New York and New Jersey.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Consumers may also be scaling back on spending because of fears about the fiscal cliff. That’s the name for automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal by then. ‘‘The upshot is that although both incomes and spending will probably bounce back in November, the underlying trend is weak,’’ said Paul Dales, senior US economist at Capital Economics.

The depressed spending figures suggest that the economy is growing more slowly in the October-December quarter than it did in the July-September quarter. Consumer spending drives nearly 70 percent of economic activity.

Dales predicts US economic growth will tumble from the 2.7 percent annual rate in the July-September quarter to a weak 1 percent in the October-December period. That’s too low to lower the unemployment rate, now at 7.9 percent.

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.