We knew this was coming and the truth is uncertainty isn’t good for the economy. It seems Americans are either in safe mode and not spending any money until the pen stops signing Executive Orders to see if they will still be allowed to keep their job. Whatever reason Americans are nervous and this is clearly reflected in the 2nd month of flat spending. This reading was for the month of December so to recap personal expenditures declined for both November and December, the core Holiday Shopping Season,
- Purchases decreased 0.2% from the prior month, following a downwardly revised 0.7% decline in November.
- Personal incomes rose 0.6%, stronger than the 0.1% ex.
In a new report detailing outlays for December 2020
The increase in personal income in December primarily reflected increases in government social benefits, compensation, and personal dividend income that were partly offset by a decrease in proprietors’ income (table 3).
- Within government social benefits, unemployment insurance increased reflecting an increase in pandemic unemployment compensation, the supplemental weekly payments to unemployment beneficiaries re-introduced through the CRRSA Act. There was also an increase in “other” social benefits, reflecting an increase in payments from the Provider Relief Fund to nonprofit institutions.
- Within compensation, the main contributor was an increase in wages and salaries in service-producing industries based on data from the Bureau of Labor Statistics Current Employment Statistics.
- The increase in personal dividend income reflected data from company financial reports.
- Within proprietors’ income, both farm and nonfarm decreased based on declines in Paycheck Protection Program loans to businesses. Farm proprietors’ income was also impacted by a decrease in payments under the Coronavirus Food Assistance Program.
The $79.8 billion decreases in real PCE in December reflected a decrease of $71.9 billion in spending for goods and a $17.6 billion decrease in spending for services (table 7). Within goods, durable goods (led by recreational goods and vehicles) and nondurable goods (led by food and beverages) both contributed to the decrease and were partially offset by an increase in spending for motor vehicles and parts (led by new light trucks). Within services, the largest contributors were decreases in spending for food services and accommodations (led by food services) and spending for health care (led by hospitals). These were partly offset by an increase in spending for household utilities (led by electricity)
So overall it looks like there has been a slow down in spending for just about everything that isn’t connected to shelter, healthcare and Utilities and a troubling sign of inflation where it matters most.