U.S. consumer spending sunk in September by the lowest rate in seven months, according to data released Wednesday by the Commerce Department.
Sales of retail goods and food services dropped 0.3 percent last month as consumers tightened their belts during a stretch of intense anxiety about a potential recession.
The state of the economy is crucial to President TrumpDonald TrumpTrump announces new social media network called 'TRUTH Social' Virginia State Police investigating death threat against McAuliffe Meadows hires former deputy AG to represent him in Jan. 6 probe: report MORE’s reelection bid as he seeks to woo swing voters with a solid job market and steady growth. An economic slowdown could be politically devastating to Trump, particularly in areas of the country yet to recover from the 2008 recession.
Despite the looming threat of a deeper slowdown, the U.S. boasts the lowest unemployment rate in 50 years. The jobless rate sank to 3.5 percent in September as the economy added 136,000 workers, though wage growth slumped to an annualized gain of 2.9 percent.
Economists closely watch movements in consumer spending, which makes up 70 percent of U.S. gross domestic product, as a tool to forecast economic growth. Despite September’s decline, consumer spending in August was revised up to a gain of 0.6 percent, and an annualized gain of 4 percent.
U.S. economic optimism also rose 3 percent in early October, according to the University of Michigan consumer sentiment survey, showing a return to a sunny outlook after recession fears peaked in August.
While the U.S economy tends to perform best in the fourth quarter, looming tariffs on Chinese imports could pose a serious blow to consumers spending early next year.
Trump is set to impose tariffs on $160 billion in Chinese-made consumer goods by Dec. 15, raising costs on articles of clothing, shoes, toys, electronics and other crucial imports. The tariffs pose the most direct economic threat to consumers from Trump's trade war with China.