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US consumer spending rose in December by most in three months

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US consumer purchases climbed in December by the most in three months as incomes picked up, signaling a steady handoff into 2017.

[WASHINGTON] US consumer purchases climbed in December by the most in three months as incomes picked up, signaling a steady handoff into 2017.

The 0.5 per cent advance in consumption, which accounts for about 70 per cent of the economy, followed a 0.2 per cent advance in the prior month, a Commerce Department report showed Monday. The December increase matched the Bloomberg median forecast. Incomes rose 0.3 per cent, less than projected.

Americans stepped up purchases during the holiday season and sales of automobiles stayed strong, capping a record year for the car industry. Solid hiring, rising wages, and low borrowing costs have increased the wherewithal to spend, while rising sentiment and expectations of lower taxes under President Donald Trump are potential tailwinds.

"The consumer has almost everything going for it," Ryan Sweet, a senior economist at Moody's Analytics Inc in West Chester, Pennsylvania, said before the report.

"As the consumer goes, so goes our economy. We're setting up for another decent year in 2017."

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Adjusting the figures for inflation, consumer spending increased 0.3 per cent in December, also the most in three months. The latest advance was led by a jump in outlays for durable goods, including motor vehicles. In 2016, real household outlays climbed 2.7 per cent, the least in three years.

Consumers flocked to auto dealerships last month to top off a record year for the industry. Sales of cars and light trucks jumped to a 18.3 million annualised rate in December, pushing the year's total purchases to a record 17.55 million, according to Ward's Automotive Group figures.

Economists' Estimates Forecasts for consumer spending ranged from increases of 0.2 per cent to 0.6 per cent, according to the Bloomberg survey. The previous month's reading was initially reported as a 0.2 per cent gain.

The Bloomberg survey median for incomes was 0.4 per cent. November was little changed. For all of last year, incomes rose 3.5 per cent, the smallest advance since 2013.

The report, on the heels of fourth-quarter data released Jan 27, provides more perspective on the state of consumer spending at the end of the quarter.

Gross domestic product climbed at a 1.9 per cent annualised rate last quarter after a 3.5 per cent pace. Household purchases grew 2.5 per cent during that period, after three per cent.

Disposable income, or the money left over after taxes, increased 0.1 per cent after adjusting for inflation after no change in the prior month.

The saving rate declined to 5.4 per cent, the lowest since March 2015, from 5.6 per cent. Wages and salaries rose 0.4 per cent last month after a 0.1 per cent decrease.

Among other details, household outlays on services rose 0.3 per cent in December after adjusting for inflation. The category includes tourism, legal help, health care, and personal care items such as haircuts, and is typically difficult for the government to estimate accurately.

The report also showed inflation is gradually moving toward the Federal Reserve's goal. The price gauge based on the personal consumption expenditures index increased 0.2 per cent from the prior month and was up 1.6 per cent from a year earlier.

The core price measure, which excludes food and fuel, rose 0.1 per cent from the prior month and was 1.7 per cent higher than in December 2015. Inflation hasn't reached the Fed's two per cent goal since 2012.


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