Consumer spending in the United States shrank by 0.5% in December, which is the biggest drop in the index in nine years. Meanwhile, the earnings rose sharply in December, though slightly declining in January.
The Ministry of Commerce reported the decrease in consumer spending after its growth by 0.7% in October and by 0.6% in November.
The December result means that spending has slowed significantly in the last quarter of 2018. They are a major factor behind the slowdown in the overall economy at the end of the year when the US gross domestic product (GDP) retreated to 2.6% after 3.4% growth in the third quarter.
The economic outlook was also darkened by other data on Friday showing factory activity hit a more than two-year low in February, with manufacturers reporting slowing new orders and hiring. The reports extended the run of soft data on an economy that lost momentum at the tail end of 2018 and gave more credence to the Federal Reserve’s “patient” stance towards raising interest rates further this year.
Income was boosted in December by a one-time special dividend by information technology firm VMware Inc as well as government payments to farmers caught up in the US-China trade war.
Wages increased by a moderate 0.3% in January after rising 0.5% in December. Economists polled by Reuters had forecast incomes rising 0.3% in January.
The cost data in January is still uncovered due to the delay in statistical information caused by the partial suspension of government agencies.