The strength of consumer spending going forward depends on whether job creation will feed into income growth and whether Congress allows taxes to rise in January, thereby eating into Americans’ paychecks. A healing housing market will also help stir spending by boosting household wealth, and falling gasoline prices could shore up buying power.
Measures of confidence, which plays a role in consumers’ decision to go shopping, have been mixed as concern over a possible jump in taxes is offset by an improving housing market and lower gasoline prices.
The Thomson Reuters/University of Michigan consumer sentiment index decreased to 74.5 this month from 82.7 in November, figures showed Dec. 7. At the same time, the Bloomberg Consumer Comfort Index rose last week to the highest level in eight months.
“Consumers will need to prioritize how and where they are spending,” Robert Hull, chief financial officer of home- improvement retailer Lowe’s Cos. Inc., said during a Dec. 5 investor conference. “The lead up to the fiscal cliff and its outcome has the potential to negatively impact both consumer and business spending. Many companies are hesitant to commit the big ticket investments or to add jobs given this uncertainty.”
Today’s Commerce Department report also showed a measure of prices tied to consumer spending rose 1.4 percent in November from a year earlier, less than the Federal Reserve’s long-run goal of 2 percent. Excluding food and energy costs, the price gauge increased 1.5 percent over the past 12 months.