Even though they haven’t been making any additional money for the past three months, consumer spending ticked up 0.6% in September. Are people spending more because they feel that the low interest rates they get from the bank make it less valuable to save?
That’s what the AP suggests. “Consumers earned only 0.1 percent last month. And after adjusting for inflation, their after-tax incomes fell 0.1 percent last month — the third straight monthly decline,” they wrote. “But the decline was largely because of a 1.4 percent drop in interest income last month, the third sharp monthly drop. Wages and salaries increased 0.3 percent in September.”
Mortgage rates are at historical lows, which is great for homeowners who can refi, but those with their money in the bank are getting hosed because the interest they’re earning is so rock bottom. At this rate, and considering inflation, some people might are figuring they might as well enjoy their money today before it’s worth less tomorrow.