The Commerce Department reported a big drop in consumer spending and small but measurable drops in personal income and disposable income in August. They blamed it on Hurricane Katrina and every news report I’ve seen has uncritically accepted that ridiculous proposition. Hurricane Katrina skirted Florida as a Category 1 storm on the 25th of August and hit the Gulf Coast on August 29th. I can’t imagine that all those people leaving the Gulf Coast for two days and staying in hotels, buying meals at restaurants, etc. caused consumer spending nationally to decline by half-a-percent for an entire month. If the effect of two days of that storm were half-a-percent of consumer spending wiped out for the entire nation for a month, watch out for September’s report when consumer spending will fall by double digits. (That’s sarcasm. If consumer spending actually falls by double digits for September, I’ll eat Robert Byrd’s hat.)
Americans’ income fell unexpectedly and spending declined more than forecast in August, the government reported yesterday, as the economy registered the effects of Hurricane Katrina and as once-strong auto sales waned.
A separate report from the University of Michigan showed that consumer confidence fell to its lowest level in almost 13 years last month, indicating that the impact of Hurricanes Katrina and Rita was taking a toll on Americans’ perceptions about the economy.