US consumer spending slips in Dec as auto sales weaken
WASHINGTON: US consumer spending slipped in December, as the pace of motor vehicle sales slowed and more Americans saved their money. The Commerce Department said yesterday that consumer spending fell 0.3 percent in December, compared to a 0.5 percent increase in November. Cheaper gasoline and fewer auto sales accounted for most of the decline. Energy prices tumbled 5.2 percent in December for the sixth straight monthly decline. Personal income rose 0.3 percent in December, aided by the steady wave of hiring over the past year. But rather than spend those gains, consumers saved 4.9 percent of their disposable income, up from 4.3 percent in November. Despite the decrease, several indicators show that Americans are growing more comfortable about the economy and are spending money again.
“Further big real income gains and soaring confidence point to serious strength in spending,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “(W)e would not be surprised to see gains approaching 5 percent annualized in the spring.” Consumer spending rose at an annual clip of 4.3 percent during the final three months of 2014, the strongest pace since early 2006, the government reported Friday. That surge helped drive overall economic growth of 2.6 percent, as roughly 70 percent of gross domestic product stems from consumer activity.
The University of Michigan reported that its consumer sentiment index stood at 98.1 percent in January, the highest reading since 2004. Half of the consumers surveyed expect the current expansion to continue for the next five years.
Construction spending
US construction spending accelerated in December as building activity increased for new houses and governmentbacked highways. The Commerce Department said yesterday that construction spending rose 0.4 percent in December. Total construction spending in 2014 increased 5.6 percent to $961 billion, with the gains slightly below the pace of 5.7 percent in 2013. Spending on single-family houses rose 1.2 percent in December from the prior month. Highway and street construction grew by 2.1 percent and factory-building by 1.9 percent. Construction of schools and commercial centers fell in December. Over the course of 2014, spending on offices, power plants, factories and lodgings climbed significantly, potentially signaling broader economic growth in 2015 that could further boost residential construction.
Sales of new home sales climbed 11.6 percent in December to a seasonally adjusted annual rate of 481,000, the Commerce Department said in a recent report. That represents a marked improvement from the total sales of 435,000 for all of 2014.
Solid job growth should spillover into construction. Employers added nearly 3 million jobs in 2014, the most since 1999. Economists surveyed by FactSet ahead of Friday’s jobs report say that employers likely added 230,000 jobs in January. The strong hiring should lead to additional demand for hotels and office buildings, according to the American Institute of Architects’ forecast for 2015. The trade group expects that construction spending will increase 7.7 percent this year on non-residential buildings, led primarily by new offices, hotels, factories and retail development projects. —AP