In the 3rd quarter of 2008, consumer spending fell the most it has fallen since 1980. Notably, this was the first cutback in spending in 17 years according to AP. Spending fell by a huge amount: 3.1%.
Compounding the problem, and showing another symptom of a bleak outlook for retail and consumer-based industries, disposable income for American families fell 8.7% this quarter -- the largest drop since 1947.
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Still looks like a deficit to me. Spending drops 3% while disposable income (AKA spendable income) drops about 8%. More debt now equals less capability to take on debt later in a debt contracting environment.
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