A shopper organizes his cash before paying for merchandise at a Best Buy Co. store in Peoria, Illinois, U.S., on Friday, Nov. 23, 2012. (Photo: Daniel Acker/Bloomberg/Getty)
U.S. consumer spending dropped in January in what is the latest sign gross domestic product growth estimates are widely overblown, Commerce Department reported. Consumer spending data, which accounts for nearly two-thirds of U.S. GDP, come after news last week that a larger-than-expected trade deficit sliced fourth-quarter growth more than previous estimates suggested.
According to the report released Monday, American households are holding back whatever extra disposable money from lower gasoline prices, largely due to stagnant incomes.
Personal spending fell to a seasonally adjusted 0.2 percent from the previous month, and December spending was unchanged from the initially estimated 0.3 percent decline. But Americans’ personal income, which reflects money collected from wages, investments and government aid, increased by a less-than-expected 0.3 percent.
Economists surveyed by The Wall Street Journal had forecast a 0.1 percent decline in household outlays, but a 0.4 percent rise in personal income.
The price index for personal consumption expenditures, which is the gauge used by the Federal Reserve to judge inflation, fell 0.5 percent from December. The inflation measure is down 0.2 percent from a year earlier. Excluding volatile food and energy components, so-called “core” prices were up 1.3 percent over the year.
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People on the lower end were finally able to start paying some of their basic debts. Now the prices are going back up. The savings on gas weren't done for a long enough period to get additional money back into circulation. You expected immediate spending when reality says that isn't possible. Try a different viewpoint and don't spout the usual media rhetoric. The price of gas going back up WILL cause further stagnation in the economy.