Consumers Pull Back on Spending—But There’s a Silver Lining
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Inflation-adjusted US consumer spending fell 0.5% in January, marking the biggest monthly decline in almost four years after a robust holiday season. The drop in outlays was driven by an outsize decline in motor vehicle purchases, and drops in categories like recreational goods.
Photographer: Daniel Acker/BloombergUS consumers pulled back on spending on goods like cars in January amid extreme winter weather. Inflation-adjusted consumer spending fell 0.5%, marking the biggest monthly decline in almost four years after a robust holiday season. The drop in outlays was driven by an outsize decline in motor vehicle purchases and drops in categories like recreational goods.
“The key question is whether this is the onset of a more cautious consumer in 2025,” said Gregory Daco, chief economist for EY. “Spending on the services front was modest, so it may be a little bit more than just a post-holiday breather.” After two weeks of sobering news on the inflation and employment front, there was however a little silver lining: the Federal Reserve’s preferred measure of underlying inflation offered some relief on Friday from all those ill tidings.