Further evidence of a cautious consumer-spending environment was found in the U.S. Department of Commerce’s personal income and outlays report today.
And at least one major bank noted a change in spending while an economist pointed to a continuing shift from buying things to having experiences — such as dining out.
The government data shows that while spending was flat for December (which compares with a 0.5 percent gain in November), households were socking away more money in the bank. Personal savings totaled 5.5 percent of disposable personal income in December, which compared with 5.3 percent in November.
The department’s Bureau of Economic Analysis noted that income gained 0.3 percent December. Wages and salary rose 0.2 percent, which compares with a 0.5 percent increase in November and a o.6 percent gain in October. Real disposable income showed a 0.4 percent gain, which is the largest increase since August. Overall prices for consumer goods and services showed a decline of 0.1 percent for the month while energy prices fell a whopping 2.6 percent. Prices on food were down 0.4 percent.
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In a conference call to investors last week, Charles Scharf, chief executive officer and director at Visa Inc., noted that consumer spending by card holders “was similar to last year, but spending patterns are changing.”
“E-commerce continues to grow at a much higher rate than the spending at physical stores,” the ceo said. “We saw midteens e-commerce growth during the holiday period versus midsingle-digit growth in the physical world. More than 25 percent of all spending on Visa cards during November and December was online, up from less than 20 percent just three years ago.”
Scharf also noted that “spending through the holidays has changed. While Black Friday and Cyber Monday remain important shopping days, less spending is consolidated on these two days than recent years, and more people delayed their spending to later in the season this year.”
Globally, the Visa ceo said that U.S. outbound spending is strong, “but it is offset by continued weakness from Canada, Brazil, and Russia. And more recently, we’re seeing increasing weakness in the Middle East and China.”
Chris Christopher, director of consumer economics at IHS Global Insight, said today’s personal spending report showed that “consumer spending ended the fourth quarter on a low note.”
“In November, consumers came out swinging — they saved less and spent more,” Christopher said. “In December, consumers took a breather and consumer spending was flat. December and October were not robust from the consumer spending view.”
Christopher also noted the shift in spending away from “things” to experiences. “Consumer spending on durables and nondurables fell in December, while services increased,” he said. “Most major pieces of nondurable spending — clothing, food at home, motor fuel, home heating oil — fell in December. Lower gasoline prices are motivating Americans to eat out, which in turn cannibalizes grocery store sales. The unseasonably warmer weather has spending on clothing and home heating oil wearing thin. Consumer spending on nondurables is likely to pick up to a faster rate in the first quarter.”
From here, Christopher said real consumer spending is expected to show a 3 percent growth rate in the first quarter.