Consumer spending on clothing and footwear fell for the second straight month in January, declining 0.8 percent compared to December, to $3.95 billion, according to the monthly personal income and outlays report released Friday by the U.S. Bureau of Economic Analysis (BEA).
Personal spending on clothing and footwear dropped 3.2 percent in December to $398.19 billion compared to the previous month, as the economy slows and consumer sentiment softens.
A recent report from IHS Markit noted that the U.S. economy is moderating and set for a slowdown. Real gross domestic product grew at a 2.6 percent annual rate in the fourth quarter of 2018, with full-year growth at 2.9 percent, boosted by tax cuts and federal spending increases.
“In the very near term, GDP growth has slowed sharply, to about 1.3 percent, reflecting a sharp, but temporary deceleration in consumer expenditures in the wake of December’s financial market turbulence and a reversal of a weather-induced surge in utility bills late last year,” the IHS economists report said.
And things may not be getting better any time soon. The Conference Board’s Consumer Confidence report for March fell to 124.1 from 131.4 last month. The Present Situation Index, which assesses current business and labor conditions, fell to 160.6 from 172.8 last month.
In January, personal consumption expenditures (PCE) across all sectors increased 0.1 percent, or $8.6 billion, BEA’s report showed. Real PCE, adjusted for inflation, also rose 0.1 percent, or $15.6 billion, which reflected a $20.8 billion increase in spending for services that was partially offset by a decrease of $7.7 billion in spending for goods. Among services, the largest contributor to the increase was spending for financial services and insurance. For goods, new motor vehicles was the leading contributor to the decrease.
The PCE price index was down 0.1 percent, as was the core index, which excludes the volatile food and energy sectors.
Personal income decreased 0.1 percent, or $22.9 billion, in January according to BEA estimates, while disposable personal income (DPI), a key barometer for retail spending, decreased 0.2 percent to $34.9 billion. Real DPI also fell 0.2 percent in the month.
BEA said the decline in January personal income primarily reflected decreases in personal dividend income, farm proprietors’ income and personal interest income that were partially offset by increases in social security benefit payments and other government social benefits, which includes the Child Tax Credit and the Affordable Care Act refundable tax credit.
Personal outlays increased $6.3 billion in January, while personal saving was $1.19 trillion in January. The personal saving rate–personal saving as a percentage of disposable personal income–was 7.5 percent.
Due to the recent partial government shutdown, the report combined some estimates for January and February 2019. January estimates include personal income and outlays measures, while February estimates are limited to personal income.
In February, personal income increased 0.2 percent, or $42 billion, as DPI rose 0.2 percent, or $31.3 billion.
The increase in personal income in February primarily reflected increases in wages and salaries, government social benefits and proprietors’ income that were partially offset by a decrease in personal interest income.
Recapping 2018, personal income increased 4.5 percent in the year compared with an increase of 4.4 percent in 2017. DPI rose 5 percent in 2018 compared with an increase of 4.4 percent in 2017. In 2018, PCE increased 4.7 percent, compared with an increase of 4.3 percent the prior year.
Real DPI was up 2.9 percent in 2018, compared with an increase of 2.6 percent in 2017, and real PCE advanced 2.6 percent compared with an increase of 2.5 percent in 2017.