By Mark Huffman
ConsumerAffairs.com
November 26, 2008
We know October was a bad month for the economy. Government statistics released Wednesday show just how bad.
The U.S. Commerce Department reports consumer spending fell by a full percentage point last month, the largest one-month drop since the September 11, 2001 terror attacks. It was the fourth straight month that consumers have spent less.
Not only did the financial meltdown and fears of rising job losses make consumers more reluctant to buy things, many of them found they couldn't buy them if they wanted to. The credit crunch made it harder for homeowners to get home equity credit lines and other consumers found credit card companies less willing to increase credit limits.
Because fewer consumers were less willing and able to spend, orders for durable goods also took a big drop during the month. These orders for big-ticket items like cars and computers plunged 6.2 percent. Even economists braced for bad news on this front were caught off guard.
Not surprisingly, some indicators of consumer confidence remain in the dumps. The Reuters/University of Michigan Surveys of Consumers said its final index reading of November's confidence level fell to 55.3 from October's 57.6, the lowest since 1980.
All of this added together suggests we're likely in the beginning phase of a recession, economists say. The government's revised estimate of third quarter Gross Domestic Product worsened, showing the economy contracted at a rate of 0.5 percent. Two back to back quarters of negative growth is the official definition of a recession.
