Consumer Spending Slid Again in December
Consumer spending fell in December, as consumers became more frugal after a volatile year due to strong markets but accelerating inflation, eroding savings and posing financial challenges for many. America.
Personal spending fell 0.2% in December, the second consecutive month of decline. After adjusting for inflation, spending fell 0.3%.
Friday’s spending data is one of the final readings on the state of the economy that the Federal Reserve will receive before announcing its spending plans. decide on the next interest rate 1. The central bank is expected to raise borrowing costs by a quarter point, slowing the pace of interest rate changes to give officials more time to see how the economy is shaping up. how.
Central banks are specifically monitoring the labor market and spending trends as they try to guess how much policy adjustment is needed. The Fed’s interest rate moves work by slowing the job market and softening demand, which in turn forces companies to raise prices more slowly to avoid losing customers.
But for most of last year, the economy still pretty resilient before the Fed’s interest rate move. While consumer savings are being eaten away by rapid inflation, some Americans have Spend slowly but steadily the extra money they hid during the pandemic. Others have benefited from a strong labor market and solid wage growth, which has helped them purchase products and services.
However, the economy and the job market are expected to slow down this year as the Fed’s policy moves constrain the economy. Inflation is expected to drop significantly when that happens, based on the most recent central bank report. economic forecast.