It's only a part of the rotten apple
Gas prices had consumer spending ailing before storms
WASHINGTON (AP) — Consumer spending in August plunged by the largest amount since 2001, according to a government report Friday that also showed a surprise decline in income caused by Hurricane Katrina.
Consumer spending dropped a larger-than-expected 0.5%, the biggest fall since November 2001.
The fall in spending came as energy prices pushed consumer inflation up 0.5%, the largest jump since September 1990, the Commerce Department said.
Adjusting for inflation, consumer spending skidded a hefty 1%, matching a plunge in September 2001 that was the largest since January 1987, as consumers pinched by soaring gasoline prices cut back in spending in other areas.
The sharp drop in spending raises concerns about consumers' staying power in the face of soaring energy bills. Consumer spending is closely watched because it accounts for two-thirds of the economy.
Analysts said the toll from Katrina and Hurricane Rita, which struck in September, is likely to depress economic activity for several months.