US Consumer Spending in December Threatens Continued Slowing of Economy

March 2, 2019 by Dan McCue
Bosch precision driving instructor Greg Vandersluis takes a vehicle through a test course at the winter test facility in Baudette, Minn., on February 5, 2019. (Glen Stubbe/Minneapolis Star Tribune/TNS)

U.S. consumer spending tumbled 0.5 percent in December, the Commerce Department reported Friday.

The slide, the biggest decline in nine years, is yet more evidence that the 2018 holiday shopping season was a disappointment for retailers and sellers of bigger ticket items, like automobiles.

The sharp decline came after sizable gains in consumer spending in October and November. In dollar terms, it reflects a decrease of $67.2 billion in spending for goods and a $18.2 billion decrease in spending for services.

Within goods, recreational goods and vehicles was the leading contributor to the decrease, the department said. There were also significant declines in the purchase of nondurable goods such as clothing.

Within services, the largest contributor to the decrease was spending for household electricity and gas.

Consumer spending is a closely watched barometer of the nation’s well-being because it accounts for about 70 percent of economic activity. Given December’s drop-off in spending, many economists expect the economy to slow further in the current quarter.

Meanwhile, incomes rose 1 percent in December but edged down 0.1 percent in January, the first decline since November 2015.

It should be noted here that while the December estimates released by the Commerce Department Friday include both income and spending measures, the January estimates were limited to personal income due to the 35-day partial shutdown of the government that ended on Jan. 25.

The January report on consumer spending held back due to the shutdown-related delay in the release of the Census Bureau’s Advance Monthly Retail Sales report.

The Commerce Department attributed January’s drop in personal income to decreases in dividend, farm proprietors’ and interest income.

Wages increased 0.3 percent in January after rising 0.5 percent in December.

The good news in Friday’s report was that inflation remained relatively benign in December.

According to the Federal Reserve, inflation rose just 1.7 percent for the 12 months ending in December — the slowest 12-month pace since a similar 12-month gain for the period ending in October 2017.

More importantly, it remained below the Fed’s 2 percent target for annual price increases.

Speaking before the Citizens Budget Council in New York City on Thursday, Federal Reserve Chairman Jerome Powell said he believes the economy is currently in good shape with low inflation and maximum employment.

But he also warned that lawmakers must do more to address issues that are holding back long-term growth, such as an increase in weak productivity.

He also expressed concern about the slowdown in growth in the labor force, a reflection in part, he said, of the growing number of baby boomers who are now retiring and lower birth rates.

More troubling Powell said is that many people aged 25 to 54 are simply dropping out of the workforce, a decline being seen particularly among the less educated.

Here too he encouraged lawmakers to do more to prepare that population to participate in a modern workforce.

“We need policies that support innovation and create a favorable environment for investment in both the skills of workers and the tools they have,” Powell said.

On Wednesday Powell told the House Financial Services Committee that the Fed intends to take a “patient approach” in deciding when to boost interest rates again.

His prepared testimony, the Fed’s semiannual monetary report to Congress, was identical to remarks he made before the Senate Banking Committee a day earlier.

He told both committees the Fed is also closely monitoring emerging risks, including economic slowdowns in China and the European Union.

Powell’s comments and Friday’s Commerce Department report come amid growing worries that the 19-country eurozone is heading toward a recession.

In a report released Friday, IHS Markit, a financial information company, reported that Europe’s manufacturing sector is contracting for the first time since June 2013.

IHS Markit’s “purchasing managers’ index” is closely watched by the European Central Bank. It fell to 49.2 points in February, down from 50.5 points the previous month. A drop below 50 points indicates a contraction in activity.

“Euro area manufacturing is in its deepest downturn for almost six years, with forward-looking indicators suggesting risks are tilted further to the downside as we move into spring,” said Chris Williamson IHS Markit’s chief business economist, in a statement accompanying the report.

“Most worrying is the downward trend in new orders,” Williamson said. “Orders are falling at a faster rate than output to a degree not seen for seven years, meaning production is likely to be pared back further in coming months unless demand revives.

“In addition to widespread trade war worries, often linked to U.S. tariffs, and concerns regarding the outlook for the global economy, companies report that heightened political uncertainty, including Brexit, is hitting demand,” he said.

In The News

Health

Voting

Economy

Texas Ends Statewide Mask Mandate, Opens State 100%
In The States
Texas Ends Statewide Mask Mandate, Opens State 100%
March 2, 2021
by TWN Staff

LUBBOCK, Texas – Texas Gov. Greg Abbott rescinded the state’s face mask mandate Tuesday afternoon, declaring that it’s time for Texans to get back to business.   “Under no circumstance can someone be punished for not wearing a mask,” Abbott said as he was surrounded by local... Read More

Apprenticeships Benefit Individuals and Employers
Employment
Apprenticeships Benefit Individuals and Employers
March 2, 2021
by Victoria Turner

WASHINGTON - The Department of Labor’s apprenticeship programs benefit individuals seeking to master skills while gainfully employed, and provides employers with the talent needed to fill the current workforce shortage, according to two Congressmen yesterday. Apprenticeships differ from paid internships in that they are not temporary,... Read More

Minimum Wage Hike All But Dead in Big COVID Relief Bill
U.S. Senate
Minimum Wage Hike All But Dead in Big COVID Relief Bill

WASHINGTON (AP) — Democrats' hopes of including a minimum wage increase in their $1.9 trillion COVID-19 relief bill seemed all but dead as the Senate prepared to debate its own version of the House-passed aid package.  Four days after the chamber's parliamentarian said Senate rules forbid... Read More

House Passes $1.9 Trillion COVID Relief Package
Congress
House Passes $1.9 Trillion COVID Relief Package
February 27, 2021
by Dan McCue

WASHINGTON – The House passed a $1.9 trillion coronavirus relief package in the wee hours of Saturday morning, helping President Joe Biden clear the first hurdle in passing an economic stimulus bill that includes $1,400 in direct payments to U.S. households, an extension of federal supplements... Read More

A New Mayor Champions Keeping COVID-Impacted Families In Their Homes
In The States
A New Mayor Champions Keeping COVID-Impacted Families In Their Homes
February 26, 2021
by Dan McCue

BOISE, Idaho – To the outsider, it seems like a movie that has a bizarre twist just as the heroine should be taking her victory lap.  Lauren Stein McLean, an entrepreneur who had served on Boise, Idaho’s city council for nearly a decade, and served as... Read More

House to Vote on Virus Bill; Arbiter Says Wage Hike a No-Go
U.S. Senate
House to Vote on Virus Bill; Arbiter Says Wage Hike a No-Go

WASHINGTON (AP) — Democrats are ready to shove a $1.9 trillion COVID-19 relief package through the House on Friday, despite a setback that means a minimum wage boost is unlikely to be in the final version that reaches President Joe Biden.A near party-line vote seemed certain... Read More

News From The Well
scroll top