U.S. Household Spending Rose Slightly in November as Inflation Eased
Personal spending increased 0.1% in November from the prior month, the Commerce Department said Friday, compared with an upwardly revised 0.9% increase in October. Households boosted spending on services last month while cutting spending on goods, including autos.
The personal-consumption expenditures price index—the Fed’s preferred gauge of inflation—rose 5.5% in November from a year earlier, a significant cooling from 6.1% in October.
The core PCE-price index, which removes volatile food and energy prices, rose 4.7% in November from a year earlier, compared with 5.0% in October.
On a month-to-month basis, the PCE-price index rose 0.1% in November from the prior month, compared with October’s 0.4% increase. Core prices rose 0.2% in November from the prior month, easing from October’s 0.3% increase.
“You have weakness in goods demand, but all the services sectors still look pretty good,” said Veronica Clark, an economist at Citigroup. She said she would be watching to see how services spending and inflation played out last month, especially with holiday travel.
Consumer spending, the main driver of economic growth, contributed to stronger than previously estimated third-quarter growth, the Commerce Department said Thursday, after two consecutive quarters of contraction.
The labor market remains tight, with unemployment at 3.7% and demand for workers greatly exceeding the number of unemployed people looking for work, though some companies have announced layoffs in recent weeks. That has helped buoy consumers despite rapidly rising prices and the Fed’s aggressive pace of interest-rate increases aimed at cooling the economy and fighting inflation.
Consumer spending has shown signs of cooling during the holiday season. November retail sales fell 0.6% from the prior month for the biggest monthly decline this year, the Commerce Department said.
Shoppers pulled back sharply on holiday-related purchases, home projects and cars. U.S. business activity declined further in December, as demand for goods decreased and factories cut production, according to surveys released last week by S&P Global. But inflationary pressures also eased.
Kayla Bruun,
an economic analyst at decision-intelligence company Morning Consult, said lower-wage workers were getting hit harder by inflation and starting to pull back spending.
“Inflation concerns are a big downward pressure on spending,” she said. “Consumers are working their way through their savings buffers they have built up.”
She also said the Fed is watching wage growth as it considers next steps in its inflation fight. The Fed approved an interest-rate increase of 0.5 percentage point this month and signaled plans to lift rates through the spring, though likely in smaller increments.
“There is a concern that the pace of wage growth will put a floor on how much those prices will fall,” Ms. Bruun said.
Donna Goodrich,
president of appliance and furniture store Top Furniture in Gorham, N.H., said holiday sales have been mixed, with good sales in November followed by a weaker December. Ms. Goodrich has twice this year boosted pay for her delivery workers to try to keep them from leaving.
“The biggest challenges for 2022 have been labor and price increases,” she said.
Mark Yonally,
co-owner of Albany, N.Y., clothing store B. Lodge & Co., said customers have been shopping for gifts in recent weeks and he is hopeful that the buying will continue through Christmas Eve, which is Saturday.
“We are having a good holiday season,” he said. “Some seasons are spread out, some come all at the last minute.”
Write to Austen Hufford at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Personal spending increased 0.1% in November from the prior month, the Commerce Department said Friday, compared with an upwardly revised 0.9% increase in October. Households boosted spending on services last month while cutting spending on goods, including autos.
The personal-consumption expenditures price index—the Fed’s preferred gauge of inflation—rose 5.5% in November from a year earlier, a significant cooling from 6.1% in October.
The core PCE-price index, which removes volatile food and energy prices, rose 4.7% in November from a year earlier, compared with 5.0% in October.
On a month-to-month basis, the PCE-price index rose 0.1% in November from the prior month, compared with October’s 0.4% increase. Core prices rose 0.2% in November from the prior month, easing from October’s 0.3% increase.
“You have weakness in goods demand, but all the services sectors still look pretty good,” said Veronica Clark, an economist at Citigroup. She said she would be watching to see how services spending and inflation played out last month, especially with holiday travel.
Consumer spending, the main driver of economic growth, contributed to stronger than previously estimated third-quarter growth, the Commerce Department said Thursday, after two consecutive quarters of contraction.
The labor market remains tight, with unemployment at 3.7% and demand for workers greatly exceeding the number of unemployed people looking for work, though some companies have announced layoffs in recent weeks. That has helped buoy consumers despite rapidly rising prices and the Fed’s aggressive pace of interest-rate increases aimed at cooling the economy and fighting inflation.
Consumer spending has shown signs of cooling during the holiday season. November retail sales fell 0.6% from the prior month for the biggest monthly decline this year, the Commerce Department said.
Shoppers pulled back sharply on holiday-related purchases, home projects and cars. U.S. business activity declined further in December, as demand for goods decreased and factories cut production, according to surveys released last week by S&P Global. But inflationary pressures also eased.
Kayla Bruun,
an economic analyst at decision-intelligence company Morning Consult, said lower-wage workers were getting hit harder by inflation and starting to pull back spending.
“Inflation concerns are a big downward pressure on spending,” she said. “Consumers are working their way through their savings buffers they have built up.”
She also said the Fed is watching wage growth as it considers next steps in its inflation fight. The Fed approved an interest-rate increase of 0.5 percentage point this month and signaled plans to lift rates through the spring, though likely in smaller increments.
“There is a concern that the pace of wage growth will put a floor on how much those prices will fall,” Ms. Bruun said.
Donna Goodrich,
president of appliance and furniture store Top Furniture in Gorham, N.H., said holiday sales have been mixed, with good sales in November followed by a weaker December. Ms. Goodrich has twice this year boosted pay for her delivery workers to try to keep them from leaving.
“The biggest challenges for 2022 have been labor and price increases,” she said.
Mark Yonally,
co-owner of Albany, N.Y., clothing store B. Lodge & Co., said customers have been shopping for gifts in recent weeks and he is hopeful that the buying will continue through Christmas Eve, which is Saturday.
“We are having a good holiday season,” he said. “Some seasons are spread out, some come all at the last minute.”
Write to Austen Hufford at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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