US households expect their spending power to rise at a slower rate over the next 12 months, as consumers prepare for what some economists say will be “a sluggish year”.
Overall, the median forecast was for household spending to grow by 2.3 per cent over the next year as of December, down from the 2.8 per cent expected in December 2018, according to information gathered by LearnBonds. This fall “was driven by respondents with a high school education or less”, according to a survey by the New York Fed.
The means Americans expect their outlay on clothing, food, medical care and housing to grow more slowly over the next year, compared to their outlook at the end of 2018. Median expectations for how much more consumers expect to spend on education remained constant at 0.4 per cent, in data in the December 2019 Survey of Consumer Expectations Household Spending Survey published this week.
However, almost two months after Christmas Americans are digesting readings that economic growth will be solid rather than spectacular this year.
Last month, the US economy grew 2.3 per cent in 2019, according to Commerce Department data, falling short of President Donald Trump’s promise to deliver at least 3 per cent growth. Growth last year was the slowest since 2016.
The President paused America’s 18-month trade war with China last month with the signing of a Phase 1 deal with Beijing. However, economists forecast this will have a muted effect on growth as US tariffs remain in place on $360bn of Chinese imports, around two-thirds of the total.
White House economic adviser Larry Kudlow shrugged off the 2019 data insisting that “it is a fundamentally healthy economy,” adding that activity will accelerate this year.
However, few economists outside the Trump administration share that view.
KPMG chief economist Constance Hunter said: “You can see the sugar high in 2018 in consumption and business investment that has gone away in 2019. We don’t see a corporate investment rebound in 2020. It’s going to be a very sluggish year.”
LearnBonds news editor Roger Baird said: “Donald Trump may be taking up the economy, but ordinary Americans, so far at least, are preparing for a solid rather than a spectacular year. How they feel in November will be most important of all in a Presidential election year.”