Entries in Consumer Spending (30)


US Personal Income Falls 3.6% in January, Biggest Drop in 20 Years

Steve Cole/Getty Images(WASHINGTON) -- Americans spent more money in the beginning of this year, even as their wallets shrunk, new government figures out Friday show.

According to the latest report from the Commerce Department, consumer spending increased 0.2 percent in January.  This jump came even as personal income fell 3.6 percent that month, reflecting the expiration of the “payroll tax holiday." The plunge is the biggest in two decades and follows a spike in December.

“The large decrease in personal income in 20 years looks to be stock dividend-related whereby most companies prepaid them to avoid Obama’s tax hikes. Dividends are now taxed at 20 percent versus 15 percent last year,” said Tom di Galoma, managing director at financial services firm Navigate Advisors LLC.

Congress and President Obama had decided not to extend the payroll tax cut from 2010, allowing it to increase to 6.2 percent from 4.2 percent.  That effectively increased the Social Security contribution rate for employees and self-employed workers by $114.1 billion at an annual rate.

The increase in consumer spending contradicts reports from some retailers like Walmart, which indicated the expiration of the payroll tax holiday negatively affected sales.

Copyright 2013 ABC News Radio


Payroll Tax Increase Weighs on Consumer Spending

Ryan McVay/Thoinkstock(NEW YORK) -- Does it seem like your paycheck has gotten smaller?  It has: 2 percent smaller, in fact, than it was in 2011 and 2012.

Back then, employees only kicked in 4.2 percent of their wages towards Social Security thanks to a temporary rate cut as part of a plan to stimulate the economy.  But as of Jan. 1, 2013, the payroll tax, which funds Social Security, among other things, jumped back up to 6.2 percent, where it had been before.  That translates to about $700 per average worker annually, reports the Tax Policy Center, a non-partisan research center.

Many economists and retailers have worried that the increase will affect consumer spending -- and so far, at least two stores have noticed a decline in sales.

Walmart, the world’s largest retailer and the biggest private U.S. employer, had the worst start to a month in seven years, based on internal company emails obtained by Bloomberg News.

In a Feb. 12 email, Jerry Murray, Walmart’s vice president of finance and logistics, said that the February month-to-date sales were a “total disaster.”

In another internal email, Cameron Geiger, senior vice president of Walmart U.S. Replenishment, asked, “Where are all the customers?  And where’s their money?

A month earlier, on a Jan. 3 conference call, Family Dollar Stores Inc. CEO Howard Levine noted that higher payroll taxes “go against our customers’ wallet.  Clearly, they do not have as much for discretionary purchases than they did.”

A report from the National Retail Federation, a retail trade association, found that January retail sales (excluding cars, gas and restaurants) increased 0.3 percent seasonally adjusted from December.  These retail sales figures indicate a “stable yet fragile economy,” NRF President and CEO Matthew Shay said in a statement.

January retail sales, released on Feb. 13 by the U.S. Department of Commerce, showed total retail and food services sales (including cars, gas and restaurants) increased 0.1 percent seasonally adjusted.

But Jim O’Sullivan, chief U.S. economist with High Frequency Economics, in Valhalla, N.Y., told ABC News that the payroll tax is a “hit to growth, but not a devastating blow.”

“Certainly a lot of people live paycheck to paycheck, but a lot of people don’t,” he said.  “With some people it won’t affect their spending, it will just affect their savings rate.  It varies from person to person.”

Robert Johnson, director of economic analysis at Morningstar, a Chicago-based investment research firm, believes the payroll tax has caused “a little slowing, but nothing very dramatic.”

He argues that any economic downshift is not just because of the increased payroll tax, but also because tax refunds have not gone out yet.

“To the high-end guy that doesn’t make a difference, but to someone counting on an income tax refund that’s another matter,” he says.

He also cites high gas prices as another factor affecting Walmart’s sales.

“People tend to drive long distances to get to Walmart, and so when gas prices go up, people say, ‘I’ll go to local store but I’m not making a special trip because it will cost me money with higher gas prices,'” Johnson says.

Copyright 2013 ABC News Radio


Consumers Remain Cautious About Spending

Brand X Pictures/Thinkstock(NEW YORK) -- With all the market euphoria, a rally in the housing market, plus gains for auto sales, it may be surprising that U.S. consumers are still very cautious about spending money.

A government survey released late last week showed the savings rate rose in December.

Phil Orlando, chief equities strategist at Federated Investors, tells ABC News Radio, “If consumers and businesses were extraordinarily confident they would be going out and spending and bringing that savings rate down.”

Gridlock in Congress may be one reason why consumers and businesses remain so cautious.

“I think what’s been going on in Washington is an economic chilling effect,” says Orlando.  “People just don’t know what to make of it and to some degree some businesses and consumers may have just held back a little bit.”

Despite recent gains, consumer confidence remains well below its historical average.

Copyright 2013 ABC News Radio


Survey: Worries over Fiscal Cliff Affecting Consumer Spending

Brand X Pictures/Thinkstock(NEW YORK) -- The approach of the fiscal cliff may be taking a bite out of consumer spending during the busiest shopping weeks of the year.

A new poll from says Americans' ratings of their financial security is down.  One in three say "they have cut back on their spending within the last 30 days specifically due to concerns about the fiscal cliff," Greg McBride of BankRate tells ABC News Radio.

"Concerns about the fiscal cliff are starting to resonate with consumers much the way we've see them resonate with businesses in recent months," he says.

The BankRate survey finds many people feel less financially secure than they did a few months ago.

"That's not good news regardless of whether or not it's holiday shopping season," says McBride.

Copyright 2012 ABC News Radio


Consumer Spending Fell 0.2% in October, Incomes Fell Flat

Ryan McVay/Thinkstock(NEW YORK) -- The economy took a hit last month as Superstorm Sandy pummeled through the East Coast, closing down major markets for days.

The Commerce Department reported on Friday that consumer spending declined $20.2 billion, or 0.2 percent, in October -- the weakest showing since May.  Personal income, meanwhile, fell flat, increasing by less than 0.1 percent.

Economist Diane Swonk told ABC News Radio that the latest figures were no surprise.

"We saw a hit in both salaries and wages as people could not get to work at the end of the month in a very important part of the country.  We also saw a hit in consumer spending that was even larger.  The biggest drop was in motor vehicle sales," she said.

She said the blow could be attributed to where the storm hit.

"Not only was Superstorm Sandy, did it have major effects, major damages, but it also hit a very critical part of the U.S. economy, very populated area, that accounts for a lot of spending and economic activity," Swonk said.

"Just New Jersey and New York alone can account for anywhere from 10 to 12 percent of retail sales in a given month.  The island of Manhattan accounts for about 20 percent of all luxury retail spending in the country," she added.

Copyright 2012 ABC News Radio


Consumers Spending Less with Credit Cards, Says Fed

George Doyle/Thinkstock(WASHINGTON) -- More families may be putting their financial houses in order. The government reports that credit card spending is down, despite an increase in available consumer credit.    
The Federal Reserve reports Americans' credit card borrowing dropped nearly $3 billion from August to September -- the third drop in four months.
The Consumer Federation's Stephen Brobeck says though Americans are spending, they are just using pay-as-you-go debit cards and cash rather than credit.

Still, consumers are taking on more debt, according to the Fed report, released Wednesday. The agency says consumers took out more student and auto loans in September.

Copyright 2012 ABC News Radio


It’s a Slow Economic Recovery, More Data Show

Zoonar/Thinkstock(WASHINGTON) -- Two new pieces of info about the U.S. economy out Friday add to the pile of data indicating a frustratingly slow economic recovery.

Americans spent more in August even though their income barely grew, the Commerce Department said.  The spending increase was driven in part by higher gas prices.  The report also showed that weak job and wage growth are keeping American incomes low.

Another widely observed report on U.S. economic activity showed the first slide in three years.  Slowing growth in China and the persistent problems in Europe are likely contributors to this drop.

The upcoming election will settle some things, according to the report.  “Uncertainty about taxes, regulations, and public policy going into 2013 is causing spending decisions to be deferred or constrained until the picture is clearer,” it said.

While this is obviously not good news, it’s important to keep in mind that this is just one month’s worth of data.  It is not clear whether this is a blip or a larger trend.

There was also news on Europe’s debt crisis: Spanish banks are short about $69.2 billion, according to stress test results, which is in line with expectations.  This is one step on the way to Spain tapping into EU funds to help its economy and banking sector.

U.S. markets are trading about a third of a percent lower Friday afternoon.

Copyright 2012 ABC News Radio


American Consumers Went on a July Spending Spree

Jupiterimages/Thinkstock(NEW YORK) -- Consumers did more than sweat during a particularly hot July. They spent more money than they did in the past five months. In fact, the spending increased 0.4 percent, the biggest boost since February.

What accounted for this rise in spending was a drop in gas prices that peaked last April.  However, prices at the pump have steadily risen over the past month.

Personal income also ticked up slightly last month, putting more Americans in a buying mood.

Since consumer spending accounts for 70 percent of economic activity, analysts expressed mild optimism that people might be starting to feel a little better about their financial situations.

However, Wall Street was unimpressed by the numbers, with the Dow Jones Industrial average falling more than 100 points as investors await Friday's speech by Federal Reserve Chairman Ben Bernanke about possibly taking more immediate and drastic action to boost the economy.

Copyright 2012 ABC News Radio


Economists: Consumer Spending Most Likely Increased in July

Brand X Pictures/Thinkstock(NEW YORK) -- Economists said before a report this week that U.S. consumer spending most likely increased in July by the most in five months, Bloomberg News reports.

A median estimate from 65 economists surveyed by Bloomberg ahead of an Aug. 30 report from the Commerce Department shows that purchases went up 0.5 percent after seeing little change in June, the news agency says.

The economists projected that this week's spending report might show a 0.3 percent increase in incomes after a 0.5 percent increase in June, which was the most in three months, according to Bloomberg.

Copyright 2012 ABC News Radio


Stocks Mixed at Close; US Consumers More Budget Conscious

Hemera/Thinkstock(NEW YORK) -- Stocks traded in a narrow range, teetering between gains and losses for most of the day. Wednesday the Dow and the S&P finally settled slightly higher, while the Nasdaq slipped.
The Dow edged up seven points and closed at 13,175.64. The S&P gained a fraction of a point, closing at 1,402.22. The Nasdaq closed at 3,011, losing five points on the day.
Still worried about the sorry state of the economy, most Americans are still nervous about spending. Consumer research firm BIGinsight says clipping coupons and tighter budgets are the "new normal" for a majority of Americans. Most impulse buying is a thing of the past.

"Consumers are still watching what they spend, saving money clipping coupons and trying to stay within budget," said Pam Goodfellow, who follows consumer spending at BIGinsight.

She added that U.S. consumers are, "focusing on what we really ned rather than on what we want and making targeted purchases and thinking about them beforehand."

Copyright 2012 ABC News Radio

ABC News Radio