Consumer Spending Slowed Down in November, While Prices Rise 5.7% to Highest in 39 Years
Consumer spending rose 0.4% in November. Despite that being a solid figure, it’s below the 1.4% reported in October. In addition, the PCE price index increased 5.7% compared to a year ago, reflecting increases in both goods and services, with energy prices increasing 34% and food prices increasing 5.6%, according to the Bureau of Economic Analysis (BEA).
This represents the fastest pace in 39 years, as a surge in inflation confronts Americans with the holiday shopping season underway, according to the Associated Press.
The November slowdown in spending can be attributed to holiday shoppers buying gifts earlier than usual this year in anticipation of product shortages, economists say, according to The Wall Street Journal.
In addition, personal income increased 0.4% in November, compared to 0.5% in October; personal income (DPI) increased 0.4% and personal consumption expenditures (PCE) increased 0.6%, compared to 0.7% in October.
According to the BEA, the increase in personal income in November primarily reflected increases in compensation of employees and government social benefits.
The BEA notes that the $104.7 billion increase in current-dollar PCE in November reflected an increase of $97.4 billion in spending for services, led by housing and utilities, and a $7.4 billion increase in spending for goods, led by recreational goods and vehicles as well as motor vehicles and parts, according to the data.
“We are still on track for very strong fourth-quarter consumption, but I am now seeing that that momentum continues to fade,” Aneta Markowska, chief economist at Jefferies, told The Wall Street Journal.
She said she expects the highly contagious Omicron variant of the COVID-19 virus to be a temporary drag on economic growth, according to The Wall Street Journal.
Indeed, several economists and analysts have lowered their GDP projections for 2022.
As GOBAnkingRates reported last week, Goldman Sachs changed its fiscal assumptions, lowering its real GDP forecast for 2022: 2% in Q1 (vs. 3% prior), 3% in Q2 (vs. 3.5% prior), and 2.75% in Q3 (vs. 3% prior), according to a research note.
In addition, the WSJ reports that economists at forecasting-firm Oxford Economics expect U.S. gross domestic product to grow at a 2.5% annual rate in the first quarter, down from a previous estimate of 3.4% growth.
However, the Conference Board Consumer Confidence Index increased again in December, after an upward revision in November, according to a statement.
“Consumer confidence improved further in December, following a very modest gain in November,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement. “The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.”
More from GOBankingRates:
- The 5 Fastest Ways To Become Rich, According To Experts
- Social Security Schedule: When You’ll Receive Payments For The Remainder of 2021
- Earn Up To $1,500 in Bonuses With This Checking Account
- Should You Refinance Now With the Low Mortgage Rates?
