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Figure for December 2009 US Consumer Spending PDF Print E-mail
Although the personal income of Americans increased by 0.4 percent in December 2009, consumer spending only increased by 0.2 percent in the busiest shopping month of the year. It is likely that job insecurity and concerns about the projected economic recovery caused shoppers to be more frugal this holiday season. Financial analysts had predicted a modest 0.3 percent increase in both earnings and spending for the month.

This lower than expected growth in spending forecasts a slow growth in the economy in 2010. High unemployment rates, which came in at 10.0 percent in December, will continue to stifle consumer spending by Americans, who will continue to save as much as possible for a rainy day. Consumer spending accounts for two-thirds of the overall economy.

Americans’ rate of savings in December was 4.8 percent. This was the highest level of savings since June 2009. At the same time, disposable income, which increased by 0.5 percent in November, only rose 0.4 percent in December.

For 2009, consumer spending in the United States increased by 1.8%, and individual income increased by 1.5%. The acceptable limits for the annual rate of inflation for consumer spending as determined by the Federal Reserve were exceeded. The limit set by the Federal Reserve is 1.7-2.0 percent for the price index as it relates to personal consumption expenditures. In 2009, the price index was 2.1 percent, 0.1 percent higher than the upper limit. When food and energy costs were excluded, the percentage was only up 1.5%.

Lower than expected consumer demand in December resulted in only marginally higher prices for the month. Personal consumption expenditures, up by 0.3 percent in November, were only up by 0.1 percent in December. Excluding fuel and food, the index rose 0.1 percent, and increase from the less than 0.1 percent in November.

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