US consumer spending up slightly by 0.1% in January
Consumer spending barely increases in the latest US government statistics.
US consumer spending in January increased by 0.1%, according to the US Bureau of Economic Analysis (BEA). The statistics about consumer spending were mostly positive, but still fell below the 0.3% that economists expected.
US January consumer spending: key figures
| Perosnal expenditures index (PCE) inflation gauge | -0.1% |
| Spending on goods | -0.2% |
| Personal incomes | +0.2% |
Why didn’t US consumer spending meet expectations?
Consumer spending grew, but at a lower rate than expected. In January, the month-long government shutdown was the likely culprit that caused a slowdown in spending as shoppers exercised caution during the economically volatile time.
The PCE inflation gauge, a measurement of US consumption, fell by 0.1%. The decline is the largest since autumn 2016. While personal income rose by 0.2%, spending on goods fell by 0.2% as US consumers bought fewer big-ticket items like cars. Joel Naroff, chief economist at Naroff Economic Advisors, said that the corporate tax cuts passed in 2018 only had a short-term positive effect on the economy.
‘Unless some positive shock hits the economy, by the fall, we are likely to be back to where we were before the tax cut bill was passed,’ said Naroff.
How will the US consumer spending statistics affect the economy?
Before the statistics about sluggish growth in consumer spending, the Fed has decided to halt interest rate increases for the rest of the year. The lack of inflation growth may lead to more patience before implementing more rate hikes. Minneapolis Federal Reserve president, Neel Kashkari, noted that if the US consumer spending data is part of a larger trend, the Fed may start considering cutting interest rates.
‘I don’t know if the recent slowdown in data is a blip or if it’s a real economic trend. If we reach the conclusion that the economy is really slowing, then I think it would be appropriate to consider cutting interest rates,’ said Kashkari.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
