By Vicki Needham - 10/01/10 10:30 PM EDT
Meanwhile, incomes increased by the largest amount in eight months during August, while consumer spending rose more than expected, reflecting a continued modest economic recovery and easing fears that the country is falling back into another recession, the Commerce Department said today.
Consumer expectations for six months from now, which usually predicts consumer spending dropped to 60.9 from 62.9, the lowest since March 2009.
Stocks gained today on the news, as the market recorded its best September since 1939.
Consumer spending accounts for about 70 percent of the economy and Americans are still showing a preference to pay for saving and paying off their consumer debt.
During the recession, consumers have focused on paying off debt and saving with the savings rate notching up slightly to 5.8 percent in August, up from 5.7 percent in July. That's considerably higher than the 2.1 percent reported in 2007 before the recession began.
Still the lack of job creation is expected to continue hindering spending as consumers remain cautious.