Photo: Revisorweb via Wikimedia Commons

Photo: Revisorweb via Wikimedia Commons

Consumer spending during December posted its biggest drop since September 2009, according to a new U.S. Commerce Department report on Monday.

The 0.3% decline in personal consumption from the month before follows a downwardly revised 0.5% increase during November. The December drop was attributed mainly to lower gasoline prices and less auto sales plus indications consumers did more of their holiday shopping in November and October.

Despite the December drop, consumer spending in the final quarter of last year increased at an annual rate of 4.3%, the best pace since 2006.

The same report showed a 0.3% increase in December from November in personal income while it posted a 3.9% increase in 2014 from the year before. Consumer spending also increased 3.9% last year from 2013’s level.

“A welcome improvement in wage growth at year end as a decline in prices boosted real take home income. Still, consumers appear to be somewhat fatigued in their spending patterns, pulling back noticeably at the end of the year despite lower gas prices,” said Sterne Agee Chief Economist Lindsey Piegza. “In the end, low gas prices will provide only a temporary boost while the key equation in terms of long-term success remains organic job and sustainable income growth.”

Meantime, a separate report shows economic activity in the manufacturing sector expanded in January for the 20th consecutive month, but at a slower pace, according to the nation’s supply executives surveyed by the Institute for Supply Management.

The January Purchasing Managers Index registered 53.5%, a decrease of 1.6 percentage points from December’s seasonally adjusted reading of 55.1% and its lowest reading in a year. Of the 18 manufacturing industries, 14 reported growth in January.

A reading above 50% indicates manufacturing activity in the U.S. is expanding while one below that number shows it’s shrinking.

"Comments from the panel indicate that most industries, but not all, are experiencing strong demand as 2015 kicks off,” said Bradley J. Holcomb,” chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The West Coast dock slowdown continues to be a problem, negatively impacting both exports and imports as well as inventories."

The New Orders Index, which measures future production and is one of several components that make up the overall index, registered 52.9%, a decrease of 4.9 percentage points from the seasonally adjusted reading of 57.8% in December.

“After months of robust inventory building, a modest domestic consumer, restrained activity overseas and plummeting oil prices are finally forcing a reduction in production, a declining trend expected to continue for some time,” said Piegza. “While a positive contributor to 2014 gross domestic production, however, with global demand modest at best, and three consecutive quarters of robust inventory growth, producers will likely need to reign in activity to eat through existing stockpiles of goods, resulting in a net contraction to headline activity.”

Finally, a third report showed total U.S. construction spending in December increased 0.4% in November, according to the U.S. Commerce Department. The December level was 2.2% higher than compared to December 2013.

For all of 2014 U.S. construction spending was 5.6% higher than the level in 2013, but was lower than 5.7% pace of 2013 compared to 2012.

During December, spending on private construction increased 0.1% from November, while residential construction posted a 0.3% gain and nonresidential construction edged 0.3% higher.

For all of last year compared to 2013 these three sectors posted increases of 7.2%, 4.1% and 10.5%, respectively.

Highway construction in December was 2.1% higher than compared to November while it posted a 4.1% gain in 2014 compared to the year before.



About the author
Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

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