updated 10/30/2006 11:59:55 AM ET 2006-10-30T16:59:55

Consumers kept a tight grip on their wallets in September, increasing their spending by only 0.1 percent. Incomes, meanwhile, rose briskly.

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The Commerce Department’s report, released Monday, showed that consumers had a solid appetite for big-ticket goods such as cars and appliances last month. However, spending on nondurable goods, including food, clothes and gas, fell. That at least in part reflected lower prices at the gasoline pump, analysts said.

The increase in spending in September, down from a 0.2 percent gain posted in August, was the smallest in 10 months. Economists said the new spending figure was held back by falling gasoline prices.

Americans’ incomes — the fuel for future spending — rose by a brisk 0.5 percent in September. That was up from 0.4 percent in August and marked the biggest gain since June.

The income and spending figures aren’t adjusted for inflation.

On Wall Street, the spending and income report, along with a lackluster sales report from Wal-Mart Stores Inc., pulled stocks lower.

September’s spending increase was weaker than the 0.3 percent gain that economists were expecting. Income growth, however, turned out to be stronger than the 0.3 percent increases that economists were forecasting.

When consumer spending is adjusted for inflation, which is now easing, the spending picture looked a lot brighter. Spending rose by 0.4 percent in September, a turnaround from a 0.1 percent dip in August.

“The finances of consumers were helped by the falloff of gasoline and other energy prices and that is what is providing consumers with a lift in spirits and a lift in spending,” said Ken Mayland of ClearView Economics.

Even though consumers spent respectably during the July-to-September quarter as a whole, the economy grew at a feeble pace of 1.6 percent, the slowest in more than three years. The culprit in the slowdown: the slumping housing market, which shaved just over 1 percentage point from overall economic activity.

With the Nov. 7 elections around the corner, the latest snapshot of national economic health fueled fresh debate between Republicans and Democrats competing with each other to hold sway at the ballot box.

Economists, meanwhile, are hopeful the current October-to-December quarter will turn out to be better and that the housing slump will not be a significant drag on overall economic activity. In addition, lower energy prices should help out, taking pressure off consumers and businesses and making them more inclined to spend and invest.

“Looking ahead, we expect decent consumption data for both October and November,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

With income growth outpacing spending, Americans’ personal saving rate — savings as a percentage of after-tax income — came in at a negative 0.2 percent in September, an improvement from negative 0.5 percent recorded in August.

An inflation measure tied to Monday’s report showed “core” prices — excluding food and energy — moderated. These prices rose by 2.4 percent over the 12 months ending in September. That was down from a 2.5 percent increase for the 12 months ending in August.

Even with the moderation, core inflation is still above the Fed’s comfort zone. Fed policymakers, however, are betting that slower overall economic activity along with lower energy prices will continue to lessen inflationary pressures in the months ahead.

With the economy slowing and energy prices retreating, the Federal Reserve held interest rates steady last week for the third meeting in a row. Many economists believe the Fed will keep its finger on the interest-rate pause button through the rest of this year and probably into much of next year.

To fend off inflation, the Fed had boosted rates 17 times since June 2004, marking the longest stretch of increases in Fed history.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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