Consumer spending in U.S. stalls as Americans boost savings
By Alex Kowalski Bloomberg News
WASHINGTON - Consumer spending stalled in December as Americans used a jump in incomes to restore depleted savings, indicating the biggest part of the economy will not be a driver of the expansion.
Purchases were little changed after rising 0.1 percent the prior month, Commerce Department figures showed Monday in Washington. The median estimate of 77 economists surveyed by Bloomberg News called for a 0.1 percent increase in sales. Incomes increased by the most in almost a year, pushing the savings rate to a four-month high.
Households, whose spending accounts for about 70 percent of the economy, may be unwilling to overextend their finances as home prices continue to fall. The weak end to the quarter raises the odds the world’s largest economy will cool after growing at the fastest pace in more than a year.
“You had a very modest shopping season, and you can apply that same adjective to the momentum heading into 2012,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, who correctly projected spending would be unchanged. “You’re still looking at very modest job growth, very modest wage increases, so without the use of credit and saving, the consumer is going to struggle to gain much momentum.”
Stock-index futures held earlier losses after the report amid concern about Europe’s debt crisis as Greece signaled opposition to economic oversight in exchange for aid. The contract on the Standard & Poor’s 500 Index expiring in March fell 0.9 percent to 1,300.8 at 8:41 a.m. in New York.
Projections for spending in the Bloomberg survey ranged from decreases of 0.3 percent to increases of 0.6 percent.
Incomes climbed 0.5 percent last month, the most since March after a 0.1 percent gain the prior month. Economists forecast incomes would climb 0.4 percent, according to the Bloomberg survey. Wages and salaries increased 0.4 percent in December after little change a month earlier.
The gain in income helped push the savings rate up to 4 percent in December, the highest since August, a sign consumers may be working to restore depleted accounts.
Adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending dropped 0.1 percent, the worst performance since August.