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Consumer spending in the U.S. hardly rose during January as households lowered their spending on a range of different goods, suggesting that the U.S. economy started the 2015 first quarter soft.
The lackluster spending came despite inexpensive gasoline and a labor market that has become more buoyant, leaving economists speculating that U.S. consumers were using their extra income to pay off debt and increase savings.
The U.S. Department of Commerce said Thursday that retail sales excluding gasoline, autos, food services and building materials were up just 0.1% in January.
That followed a drop of 0.3% in December and was below expectations on Wall Street of an increase of 0.4%.
The retail sales that are dubbed “core” correspond the closest with the component of consumer spending used in the gross domestic product.
Retail sales overall dipped 0.8% during January, which was the second consecutive month of decline as falling prices of gasoline undercut sales at gas stations across the nation.
The economy grew during the fourth quarter of 2014 at an annual pace of 2.6%. However, trade and inventory data for December was lower than government estimates in the report on GDP, suggesting that growth could be revised down to a rate of just 1.8%.
On Thursday, financial markets in the U.S. were little changed by the data, with much of the attention focused on ceasefire details between Ukraine and Russia and a surprise cut in interest rates in the bond-purchasing program that the central bank in Sweden announced.
Despite a drop of 39.5% in prices of gasoline since mid June, spending by consumers had been soft over the last two months.
Less expensive prices of gasoline and strong gains in employment are projected to provide strong stimulus to spending by consumers and keep the U.S. economy on its growth path despite the economies across Europe and Asia sputtering.
Consumer spending accounts for over two-thirds of the economic activity in the U.S., and expanded at its fastest pace in 8 years, during the 2014 fourth quarter.
