Shoppers Finished ’99 With Holiday Buying Spree
U.S. consumers sacrificed savings in December to finance a holiday shopping spree, capping a year in which spending rose at the fastest rate in 10 years, the government said Monday.
Spending in December rose 0.8% to a seasonally adjusted annual rate of $6.473 trillion after a 0.7% rise in November, the Commerce Department said. Incomes gained by 0.3% to $7.998 trillion after a 0.4% pickup in November.
For all of 1999, spending on goods and services climbed 6.9% after a 5.9% rise in 1998, the strongest yearly gain since a 7.2% jump in 1989.
The report was issued the day before Federal Reserve policymakers start a two-day session expected to result in an interest rate rise to cool the economy. Economists said it pointed to buoyant spending that would likely keep a record expansion running well into the future.
With spending on goods and services accounting for two-thirds of national economic activity, the expansion surges into a record 107th month today with a strong head of steam and scant sign of waning.
Personal incomes for all of 1999 rose 5.9%, the same as in 1998, and savings dipped to a record low 2.4 cents out of each dollar earned last year, down from 3.7 cents in 1998, the Commerce Department said.
The report came within expectations and so had only limited impact on financial markets.
Some analysts worried that vigorous economic growth might mean the U.S. central bank was on the verge of a round of rate increases in coming months to try to put brakes on the economy and keep prices in check.
“These numbers clearly indicate that inflation, although it’s still very low and creeping higher, is out of the bag,” Aron Gampel, deputy chief economist with the Bank of Nova Scotia, told Reuters.
Savings in December fell victim to spending. The department said a record low 1.5 cents of each dollar earned was saved, down from two cents in November.
Incomes from wages and salaries paid by the private sector grew at a $30.1 billion annual rate in December, nearly triple the $11.6-billion rate of increase in November.
Manufacturing payrolls increased at an $800-million annual rate after shrinking by $3.9 billion in November.
Separately, purchasing managers in the Chicago Midwest region said their key measure of business activity eased moderately in January to 55.6 from 56.0 in December.
The Chicagoland Business Barometer still indicated a healthy level of business, with new orders up from December and production modestly lower. A reading over 50 suggests a growing level of manufacturing activity.
