Consumers Keeping Growth Afloat Optimistic consumers are keeping the U.S. economy on track for continued modest growth, despite weakness overseas and a manufacturing slump at home.
(…) Even with healthy consumer spending, however, the U.S. economy seems unlikely to accelerate much beyond its average postrecession growth rate of 2.2% anytime soon as it faces powerful forces like demographic changes and slow productivity growth. (…)
Consumer spending rose 0.3% in November from a month earlier, the Commerce Department said Wednesday, and personal income also rose 0.3%. The personal saving rate last month was 5.5%, ticking down from October but still at its second-highest level since the end of 2012. (…)
Meanwhile, overall inflation remains subdued, with the broad personal consumption expenditures price index rising just 0.4% in November from a year earlier, the Commerce Department said Wednesday. Underlying inflationary pressures appear steady, with prices excluding food and energy rising 1.3% on the year last month.
From Haver Analytics:
Personal consumption expenditures increased 0.3% during November (2.9% y/y) following no change in October, revised from 0.1%. (…) Spending also rose 0.3% (2.5% y/y) in constant dollars as prices remained unchanged. A 1.4% increase (6.3% y/y) in real home furnishing & appliances purchases led last month’s gain as it added to a 0.3% rise. Recreational goods buying was notably strong and rose 1.0% (10.1% y/y) on the heels of a 1.6% jump. Real motor vehicle purchases gained 1.0% (-0.2% y/y), rebounding from a 2.2% fall. Nondurable goods sales also strengthened 0.9% in constant dollars (3.0% y/y) after two months of slight decline. Real purchases at gasoline filling stations were notably firm, rising 1.6% (2.4% y) and rebounding from a 2.1% shortfall. Clothing spending strengthened 1.1% in real terms (2.1% y/y), food & beverage buying also gained 1.1% (1.1% y/y) but “other” purchases improved a lesser 0.5% (5.2% y/y). Real spending on services was little-changed (2.0%) for a second consecutive month. Real health care outlays rose 0.2% (3.6% y/y), the smallest rise since April, but recreation services spending fell 1.1% (-0.0% y/y) after a 0.1% rise.
Personal income improved 0.3% (4.4% y/y) after an unrevised 0.4% increase. A 0.2% rise had been expected. It was powered by a 0.5% gain (4.5% y/y) in wage & salaries which followed a 0.6% rise. Rental income jumped 0.8% (7.2% y/y) for the second straight month. Transfer receipts rose 0.3% (5.2% y/y), driven by a 2.2% jump (13.4% y/y) in payments to veterans. Medicare receipts rose 0.5% (4.3% y/y) for a second month. Jobless insurance benefits recovered 0.9% (0.9% y/y) after declines in three of the prior four months. Proprietors earnings ticked 0.1% higher (2.7% y/y) after two 0.4% increases. Dividend earnings declined 0.8% (+3.2% y/y) while interest earnings fell 0.2% (+3.1% y/y) for the second straight month.
Disposable personal income increased 0.3% (3.9% y/y) after a 0.4% gain. Adjusted for price inflation, take-home pay rose 0.2% (3.5% y/y), the smallest rise since June.
The personal savings rate eased to 5.5% from an unrevised 5.6%. The rate remained nearly the highest since 2012. Personal saving increased 23.3% during the last twelve months.
Malls Reel as Web Roars With Holiday Shopping
(…) Even as the margin of error to have gifts comfortably arrive before the holiday melted,shoppers chose the Internet over a trip to the mall. Sales at physical stores fell 6.7% over the most recent weekend, while traffic declined 10.4%, according to RetailNext, which collects data through analytics software it provides to retailers. That is worse than the 5.8% decline in sales and the 8% drop in traffic recorded from Nov. 1 through Dec. 14. (…)
Retailers have faced challenges this year that include unusually warm weather that has damped demand for coats, sweaters and other winter gear, as well as a decline in spending by tourists visiting the U.S. as a result of the strong dollar. (…)
Online-only retailers, however, have pulled back on broad promotions in December, according to PwC research. “The leading online-only retailers aren’t playing the big promotion game as much. They are using big data and tailoring personal curated items,” to spur online shoppers to buy, said Steve Barr, retail consultant at PwC.
E-commerce sales rose 11.8% from Nov. 26 through Dec. 20 compared with a year ago, according to ChannelAdvisor Corp., which makes e-commerce software and measures online transactions. Forrester Research Inc. expects e-commerce to account for 14% of retail sales in November and December. (…)
According to RetailNext, shoppers who did trek to stores during the last weekend before Christmas spent more per visit than last year, but the last-minute rush likely won’t make up for what is turning out to be a lackluster season.
Craig Johnson, the president of research firm Customer Growth Partners, estimates total sales are likely up 3.1% so far for the season, less than his prediction for a 3.2% increase. He is holding out hope that retailers can make up lost ground in the week after Christmas, when 10% to 15% of holiday sales occur, according to the National Retail Federation.
And in what could be a rare bright spot for retailers with physical stores, 47% of consumers polled by the NRF said they planned to shop in stores that week, compared with 43% who said they planned to shop online.
U.S. Durable Goods Orders Little Changed in November
Durable goods orders were little changed in November (+1.2%y/y) following a 2.9%m/m jump in October (revised down slightly from the initially reported 3.0%m/m rise). Action Economics’ Forecast Survey had anticipated a 0.7%m/m decline. A swing in orders for nondefense aircraft and parts was the major source of the November slowdown. Nondefense aircraft orders slumped 22.2%m/m in November after having surged 78.7%m/m in October. The timing of the Dubai airshow was likely behind this wide monthly swing in aircraft orders. Excluding orders in the transportation sector, other orders slipped 0.1%m/m (-1.9%y/y) after a 0.5%m/m increase in October. Market expectations looked for an unchanged reading.
Capital goods orders also moderated in November after a good start to the fourth quarter in October. Core capital goods orders (capital goods orders excluding defense and aircraft) slipped 0.4%m/m following a downwardly revised 0.6%m/m increase in October (originally +1.3%m/m). This left these orders up 1.3% AR from the third quarter average. Core capital goods shipments remained tepid in November. They fell 0.5%m/m after a downwardly revised 1.0%m/m fall in October (originally -0.5%m/m). This left these shipments down 4.8% AR from the third quarter average and augurs a weak reading for business equipment spending in the Q4 national accounts.
Investors Pull Out of Mutual Funds at the Fastest Rate in Two Years
Net redemptions reached $28.6 billion in the week ended Dec. 16, according to a statement from the Investment Company Institute, a trade group. It was the biggest weekly outflow since June 2013, ICI data show.
Some of the redemptions might reflect year-end tax-loss selling, which are sales made for tax purposes, ICI Senior Economist Shelly Antoniewicz said in the statement.
Investors withdrew $11.1 billion from stock funds, $12 billion from bond funds and $5.6 billion from funds that buy a mix of stocks and bonds. Municipal bond funds attracted $647 million, the only category that saw inflows.
Mutual funds have experienced net redemptions every month since July, according to ICI data. In each of the first six months of the year, funds gathered money.
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