US Consumer Spending Drops in December

US consumer spending recorded its biggest decline since late 2009 in December, with households appearing to save the extra cash from cheaper gasoline, which could support future consumption.

Other data on Monday showed factory activity slowed in January, suggesting economic growth continued to cool early in the first quarter.

The Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, fell 0.3% after a 0.5% gain in November.

It was the largest drop since September 2009 and reflected big declines in spending on both durable and non-durable goods.

When adjusted for inflation, consumer spending was the weakest since last April.

In a separate report the Institute for Supply Management said its national factory activity index fell to 53.5 last month from 55.1 in December. A reading above 50 indicates expansion in the manufacturing sector.

US stocks were trading lower on the reports. Prices for US government debt fell and the dollar eased against a basket of currencies.

The spending data was included in Friday’s fourth-quarter gross domestic product report, which showed the economy growing at a 2.6% annual pace, with consumer spending rising at a brisk 4.3% rate – the fastest since 2006.

Despite ending 2014 on a weak note, lower gasoline prices and a firming labor market are expected to provide a huge tailwind to consumer spending in the first quarter.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza