US con­sumer spend­ing cooled in Dec

The Pak Banker - - BUSINESS -

House­hold spend­ing cooled in De­cem­ber as Amer­i­cans used gains in in­comes to boost their sav­ings.

Con­sumer pur­chases were lit­tle changed af­ter a 0.5 per­cent ad­vance in Novem­ber that was big­ger than pre­vi­ously es­ti­mated, Com­merce Depart­ment fig­ures showed Mon­day. The Bloomberg sur­vey me­dian fore­cast called for a 0.1 per­cent in­crease. In­comes climbed 0.3 per­cent for a se­cond month. House­hold pur­chases mod­er­ated in the fourth quar­ter, con­tribut­ing to a slow­down in the econ­omy as busi­nesses slashed in­vest­ment and worked to pare down in­ven­to­ries. A spend­ing re­bound, pow­ered by sus­tained job gains and low in­fla­tion, will be needed to rein­vig­o­rate growth in the com­ing quar­ters.

"Con­sumers in the U.S. have got­ten a lit­tle sav­ings re­li­gion given what hap­pened in the pre­vi­ous decade with the fi­nan­cial cri­sis, but I don't think they've com­pletely changed their habits," said Bob Stein, deputy chief econ­o­mist at First Trust Port­fo­lios LP in Wheaton, Illinois, who cor­rectly fore­cast De­cem­ber spend­ing. "Even­tu­ally, con­sumers are go­ing to loosen up on their pock­et­books and their wal­lets." Pro­jec­tions of econ­o­mists in the Bloomberg sur­vey for spend­ing ranged from a 0.2 per­cent de­cline to a gain of 0.5 per­cent. The pre­vi­ous month's read­ing was ini­tially re­ported as a 0.3 per­cent in­crease. In­comes were pro­jected to rise 0.2 per­cent.

Dis­pos­able in­come, or money left over af­ter taxes, in­creased 0.4 per­cent in De­cem­ber from the prior month af­ter ad­just­ing for in­fla­tion. It grew 3.5 per­cent in 2015, the most in nine years. The sav­ing rate in De­cem­ber climbed to 5.5 per­cent from 5.3 per­cent and matched the high­est since the end of 2012. Fed pol­icy mak­ers are keep­ing a close eye on in­fla­tion, the part of their dual man­date that's fur­thest from be­ing ac­com­plished. In­fla­tion "is ex­pected to re­main low in the near term, in part be­cause of the fur­ther de­clines in en­ergy prices," of­fi­cials said in a state­ment at the con­clu­sion of a two-day meet­ing in Wash­ing­ton last week.

Af­ter ad­just­ing for in­fla­tion, which gen­er­ates the fig­ures used to cal­cu­late gross do­mes­tic prod­uct, pur­chases climbed 0.1 per­cent last month af­ter a 0.4 per­cent gain in Novem­ber. A re­port last week showed the econ­omy ex­panded at a slower pace in the fourth quar­ter as house­holds tem­pered spend­ing and busi­nesses cut back on cap­i­tal in­vest­ment and ad­justed in­ven­to­ries. GDP climbed at a 0.7 per­cent an­nu­al­ized rate af­ter a 2 per­cent pace in the third quar­ter.

House­hold pur­chases rose at a 2.2 per­cent an­nu­al­ized pace in the fourth quar­ter, com­pared with a 3 per­cent rate in the pre­vi­ous pe­riod. Even with the slow­down, con­sumer spend­ing ad­vanced 3.1 per­cent for the year, the most since 2005.

Mon­day's re­port showed spend­ing in De­cem­ber was led by ser­vices, which climbed an in­fla­tion-ad­justed 0.3 per­cent. Spend­ing on durable goods, in­clud­ing au­to­mo­biles, de­creased 0.7 per­cent ad­just­ing for in­fla­tion, the most since June, fol­low­ing a 1.8 per­cent surge in Novem­ber. Pur­chases on non-durable goods, which in­clude gaso­line, dropped 0.2 per­cent. Amer­i­cans' ap­petites for au­to­mo­biles have waned some­what, which con­trib­uted to the mod­er­a­tion in fourth-quar­ter spend­ing.

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