Consumer Spending Drop Largest Since 2001

WASHINGTON -- As the financial crisis was gaining force, Americans cut back on their spending in October by the largest amount since the 2001 terrorist attacks.

The Commerce Department reported Wednesday that consumer spending plunged by 1% last month, even worse than the 0.9% decline that had been expected.

It says personal incomes were up 0.3% last month, slightly better than the 0.1% gain analysts had expected.

The big decline in spending in October underscores concerns that the economy is falling into a deep recession. Consumer spending accounts for two-thirds of total economic activity.

In a separate report, the government says jobless claims fell more than expected last week from a 16-year high, but remain at elevated levels due to the slowing economy.

The Labor Department says initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. That is lower than analysts' expectations of 537,000.

Still, the initial claims number remains at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.