Clunkers Fail, Ctd.

I fear I'm sounding like a broken record, but this is one song that deserves to be played until your ears bleed.  Once again proving that Americans buy stuff with a finite supply of money (as opposed to an endless supply of magic beans and pixie dust), consumer spending dropped dramatically upon the conclusion of the "successful beyond anyone's wildest dreams" Cash for Clunkers program.  Here's MarketWatch on Friday with the disheartening-yet-totally-expected news:

U.S. consumer spending fell sharply in September after the government's cash-for-clunkers program expired, while after-tax incomes dropped for the fourth month in a row, the Commerce Department estimated Friday.

On a real (inflation-adjusted) basis, consumer spending sank a seasonally adjusted 0.6% in September, a reversal from the 1% gain seen during in August, the government's data showed. It was the largest decline in spending since December.

Real disposable incomes after taxes also fell, off a seasonally adjusted 0.1% to mark the fourth consecutive decline.

Despite overall growth in the economy in the third quarter, incomes aren't growing and jobs are still being lost at a rapid pace.

"The labor market remains challenging and until we see real improvement, sustained wage gains will be elusive," wrote Adam York, economist with Wells Fargo Securities....

Sluggish income growth is a major challenge for consumers in the fourth quarter, said Lori Helwing, economist for Bank of America's Merrill Lynch. She expects consumer spending to grow at an annualized pace of just 0.5% in the quarter, a big downshift after a 3.4% pop in the third quarter.

Meanwhile, the Commerce Department said current-dollar (not inflation-adjusted), spending dropped 0.5% in September after a 1.4% gain in August. Current-dollar incomes were flat, coming down from a 0.1% gain in August.

Economists surveyed by MarketWatch had been looking for nominal spending to fall 0.4% and for incomes to ease 0.1%....

The decline in September spending was largely due to the end of the government's subsidy program for autos.

Real spending on durable goods, including autos, fell 7.2% in September, pivoting off a 6.7% increase seen in August. Still, the level of spending on durable goods in September was higher than in July.

Real spending on nondurable goods rose 0.5%, on the heels of a 0.9% gain in August. Spending on goods excluding autos was "solid," according to Morgan Stanley economist David Greenlaw, who projects spending will rise about 2% on an annualized basis in the fourth quarter.

Totally and utterly unsurprising.  I just hope that the White House won't now attack the Commerce Department for this unapproved bad news.  (Edmunds fired back today at the White House, btw.)