US consumer spending barely rises after weaker GDP growth

[WASHINGTON] US consumer spending barely rose in January after economic growth was weaker than previously reported at the end of last year.

Inflation-adjusted consumer spending increased 0.1 per cent from the prior month, according to Bureau of Economic Analysis data out Friday (Mar 13). The so-called core personal consumption expenditures price index, which excludes food and energy items and is favoured by the Federal Reserve, rose a firm 0.4 per cent.

Another report from the BEA showed the US economy expanded at a 0.7 per cent annualised rate in the fourth quarter – when the government experienced a record-long shutdown – compared to an initial estimate of 1.4 per cent. Consumer, business and government spending, as well as exports were marked down, but a gauge of underlying demand was relatively solid. 

The economy is in a different place now, as the war in Iran has boosted energy prices and may take a toll on household sentiment.

Tax refunds, as well as firm wage growth, should lend some support to consumers’ finances in the months ahead. Still, economists see a risk to spending going forward given the threat of greater inflation from the conflict and a fragile job market.

“Health care, housing and insurance were top categories for spending in January,” Heather Long, chief economist at Navy Federal Credit Union, said in a note. “Of course, all of this is ancient history now.”

SEE ALSO

US core capital goods orders unexpectedly flat in January

US Q4 GDP growth revised down to 0.7%

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While Fed officials are widely expected to leave interest rates unchanged at their policy meeting next week, a sustained pickup in inflationary pressures could delay a resumption of rate cuts at a time when President Donald Trump continues to demand them. BLOOMBERG