US consumer spending and incomes rose but at a slower pace in 2019 compared to the previous year, according to government data released on Friday.
Personal consumption expenditures rose 0.3 per cent last month, slightly slower than the prior month, but personal income gained just 0.2 per cent, the Commerce Department reported.
And both measures posted much slower increases than in 2018, with income up 4.5 per cent in the year and expenditures rising 4.0 per cent, according to the report.
‘Consumer spending has shielded the economy from global headwinds for most of 2019 but some signs of cracks in the consumer’s armour have appeared,’ analysts at Oxford Economics said in a commentary on the data.
Meanwhile, the report confirmed that price increases remained tepid last year, reflected by a closely-watched measure of US inflation which rose just 1.6 per cent in December compared to 2018.
Though that inflation rate was the highest annual pace in a year, it remains well below the Federal Reserve’s 2.0 per cent target.
Persistently low inflation continues to worry and baffle central bankers, especially at a time when the economy continues to expand and unemployment is at historic lows, which should result in rising wages and increased price pressures.
Excluding volatile food and energy goods, the ‘core’ inflation gauge — Personal Consumption Expenditures (PCE) price index — also rose 1.6 per cent year-over-year.
PCE inflation rose 0.3 per cent compared to November, as expected, while the core rate was 0.2 per cent.
Lagging inflation is a concern for the Fed because with interest rates very low there is little room for the central bank to move to stimulate the economy in a downturn.
‘We have seen this dynamic play out in other economies around the world and we’re determined to avoid it here in the United States,’ Fed chairman Jerome Powell said on Wednesday.
‘We’re not satisfied with inflation running below 2 per cent.’
The Fed cut the key lending rate three times last year amid signs the global economic slowdown would spill over onto US shores, battered by US President Donald Trump’s trade confrontations with China and other countries.
New data released Thursday showed the US economy last year grew at the slowest pace since Trump took office, with GDP expanding 2.3 per cent, well below the rate he promised his economic policies would deliver.
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