According to Reuters, Consumer spending within the U.S. in December increased due to increased demand for goods and services. Americans may have been more likely to spend due to confidence in the stock market, including a rise in home prices. Although consumer spending has been rising, savings have dropped to a 10-year low.
“It is true that the gains in consumer confidence as well as in the stock market and housing wealth are making Americans feel much better today than they were previously,” said Eugenio Aleman, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
“That said, the U.S. consumer will need to see continuous growth in income over the year in order to be able to continue to keep up the current pace of consumption.”
“The continued drawdown in the (saving) rate will likely limit the extent to which consumption can continue to accelerate, all else equal,” said Michael Gapen, chief economist at Barclays in New York.
The Personal Consumption Expenditures (PCE), rose 0.2% from its previous gain of 0.1% in November.
We believe inflation will firm in 2018, supported by a positive output gap, rising energy prices and a weaker U.S. dollar,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.