By Martin CRUTSINGER, AP Economics Writer
WASHINGTON (AP) – US consumer spending fell 0.4% in November, the first drop since April as Americans faced a new resurgence virus.
The decline increased 0.3% in October and also increased significantly in May, the Commerce Department reported on Wednesday, a period when the country was emerging from a lockdown aimed at stopping the spread of COVID-19. This led to a steep 12.7% drop in April.
In November, personal income fell 1.1% in November, the third decline in the last four months as various government relief programs are ending.
Inflation, measured by a gauge preferred by the Federal Reserve, showed a modest 1.1% gain in November, well below the Fed’s 2% target. Readings of benign inflation will continue to support the Fed levee an economy that has absorbed millions of people who suddenly become unemployed as businesses shut down or lay off workers.
However, economists fear weak spending by Americans will slow economic growth in the coming months. Congress passed a $ 900 billion pandemic rescue package on Monday, but President Donald Trump, with direct payments to Americans, described the day as insufficient.
Consumer spending accounts for around 70% of economic activity, so even a small decline can overshadow economic growth.
It is unknown whether Trump will sign the measure, which has been fought for months, as his presidency ends.
Without more government help, the economy could be crippled, and economists say the pullback could be considered a harbinger of worse days when Americans spent last month as a resurgent coronovirus leads to more shutdowns.
COVID-19 has killed more than 318,000 Americans and counting.
“The rapidly deteriorating health conditions, declining incomes, decreasing savings for low-income families and cooler weather ed consumers to close their wallets in November,” said Gregory Dako, chief economist at Oxford Economics. “The economy is entering 2021 with very little mobility.”
The government reported on Tuesday that the total economy, measured by GDP, grew at a record 33.4% annual rate from July to September, reversed by a record decline in the second quarter.
But what is worrying is that growth could slow down considerably in the current quarter and some analysts believe that GDP could return to negative territory in the first quarter of 2021 without congressional support.
The 1.1% drop in personal income reflected the fact that government transfer payments continued to decline sharply in November as more unemployed Americans exhausted their unemployment benefits.
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