Weak US Consumer Spending Points to Slow Q1 Growth

U.S. consumer spending fell for a second straight month in January as households continued to cut back on purchases, opting to save much of the massive windfall from cheaper gasoline. 

Other data on Monday showed factory activity slowed in February and construction spending declined sharply in January, adding to signs that economic growth moderated early in the first quarter.

“Growth is slowing in the first quarter after a strong second half of last year. All the gas savings are ending up at the bank rather than being spent,” Thomas Costerg, an economist at Standard Chartered Bank in New York.

 
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, slipped 0.2 percent after falling 0.3 percent in December. The January dip reflected lower gasoline prices, which weighed on sales receipts at service stations, as well as drop in purchases of big-ticket items.

With lower gasoline prices dampening inflation pressures, the so-called real consumer spending increased 0.3 percent after slipping 0.1 percent in December.

But economists said the rise in the measure, which goes into the calculation of gross domestic product, was disappointing.

That and another report from the Commerce Department showing a 1.1 percent drop in construction spending in January prompted some economists to cut their first-quarter growth estimates.

via Reuters

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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