Slow U.S. Consumer Spending Signals Caution -- Update
25 November 2015 - 7:20PM
Dow Jones News
By Jeffrey Sparshott
U.S. consumers have grown increasingly cautious ahead of the
holiday shopping season, a potential weight on economic growth
during the final months of the year.
The latest evidence: Americans last month socked away much of
their income from rising wages, pushing the personal saving rate to
its highest level in nearly three years.
"Consumers have the wherewithal to spend, they just don't want
to," Michelle Girard, an economist at RBS Securities, said in a
note to clients.
It isn't clear whether October will prove to be a one-month
blip--setting up a holiday spending splurge--or a broader pullback
amid mixed economic signals at home and trouble overseas.
While consumers remain relatively upbeat, key measures of U.S.
consumer confidence slipped at the end of November. The University
of Michigan's consumer sentiment index for November fell to 91.3
from a midmonth reading of 93.1.
"The data indicate that consumers have become increasingly aware
of economic crosscurrents in the domestic as well as the global
economy," said Richard Curtin, the survey's chief economist.
That may include layoffs across the energy sector brought on by
low oil prices, struggles among manufacturers weighed down by a
strong dollar and tepid overseas demand, terrorist attacks in Paris
and strife in Syria, Iraq and elsewhere in the Middle East.
The latest government figures on personal spending, which
measure how much Americans paid for everything from new shoes to
home heating, reflect the lingering caution. Consumption climbed
only 0.1% in October from a month earlier, the same slow growth as
in September, the Commerce Department said Wednesday.
Personal income rose a healthier 0.4% in October, led by gains
in dividends, rental income and wages.
Rather than spend, though, Americans in October decided to put
away more money. The personal saving rate, which measures the share
of a person's disposable income that is saved, was 5.6% in October,
the highest level since December 2012. At $761.9 billion, the level
of personal saving was also the highest since the final month of
2012, when new taxes set for 2013 skewed the numbers.
Businesses have struggled to pin down what is driving spending
patterns. Retailers have looked to everything from warm weather to
a slowdown in the energy industry to explain consumer behavior.
"We've certainly spent a lot of time here trying to understand
the consumer and they really are right now--it's a bit of a
mystery," Sandra Cochran, president and CEO of Cracker Barrel Old
Country Store Inc., told investors this week.
Ms. Cochran noted that cheaper gasoline has given consumers
additional disposable income but it isn't clear how they are using
the windfall. And, by many measures, the labor market has been
strong, though confidence appears to have slipped amid a slowdown
in some sectors.
"It appears as though many consumers are angry," Ms. Cochran
said. "They all seem to be--not necessarily at the same thing. Lots
of concern about global issues, concern about layoffs and so on. So
I would say that right now the consumer is a mystery."
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
(END) Dow Jones Newswires
November 25, 2015 14:05 ET (19:05 GMT)
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