Fleet Management

Economic Watch: Consumer Spending Up, Sentiment Down

January 31, 2014

By Evan Lockridge

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Consumer spending in the U.S. posted modest gains in December and all of last year, according to new Commerce Department figures.

It increased 0.4% from the month before, following an upwardly revised 0.6% gain in November from October, the strongest consecutive monthly hikes since early 2012.

For all of 2013 it advanced 3.1% from the year before, weaker than the 4.1% pace in 2012, but it rebounded in the second half of last year.

“Consumers continued to spend through the end of the year, that's the good news, said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “The bad news, consumption growth continues to outpace income gains suggesting an unsustainable model going forward unless income growth picks up or consumers dramatically curtail spending. Given that 60% of employment gains thus far in this recovery have been in the part time and low wage sectors, the latter appears the more probable scenario at this point.”

The news on consumer spending follows a report from Thursday showing the U.S. economy expanded at a healthy pace in the final quarter of last year amid a big jump in consumer spending.

Meantime, a separate report released Friday shows consumer sentiment in January has cooled from the month before.

The Thomson Reuters/University of Michigan final index of sentiment dropped to 81.2 this month from 82.5 in December, but up from the preliminary January reading of 80.4.

"Prospects for either consumers' own personal finances or for the economy as a whole have remained more resistant to improvement, especially longer term prospects," said Richard Curtin, survey director. "This has prevented recent economic gains from building the type of positive upward momentum that has sparked and sustained increases in consumer optimism and confidence."

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