Consumer Spending Declined in December

New York, NY, January 30, 2023-U.S. households turned cautious at the end of last year, cutting spending during the holiday shopping season and increasing savings, adding to signs of an economic slowdown, according to the Wall Street Journal.

“Consumer spending fell a seasonally adjusted 0.2% in December from the prior month, the Commerce Department said Friday, the second straight monthly drop following solid spending increases during several months last year. Adjusted for inflation, spending fell 0.3% last month.

“The pullback in spending came as inflation cooled, giving consumers some relief from rapidly rising prices. Households cut spending on goods as prices fell for gasoline and other energy products, the department said. They increased spending on services, where prices climbed.

“U.S. stocks rose Friday with major indexes posting solid gains for the week, boosted by investors’ hopes that inflation is moderating.

“The personal-consumption expenditures price index, the Federal Reserve’s preferred gauge of inflation, rose 5% in December from a year earlier, after increasing 5.5% in November.

“The core PCE-price index, which removes volatile food and energy prices, rose 4.4% in December from a year earlier, its slowest pace since October 2021. That compared with 4.7% in November. The central bank aims for 2% annual inflation.

“On a month-to-month basis, the PCE-price index rose 0.1% in December from the prior month, matching November’s increase. Core prices rose 0.3% in December from the prior month, up from November’s 0.2% increase.

“The figures leave Fed officials on track to raise interest rates by a quarter-percentage point to a range between 4.5% and 4.75% at their meeting next week, where they also are expected to debate how much higher to raise rates this year. The Fed raised rates aggressively last year in a campaign to cool the economy and bring down high inflation.”