Consumers cut back on spending as income drops

Consumers cut back on spending as income drops

Consumer spending dropped in November for the first time since the recovery from the recession started in May, weighed down by a plunge in income.

Fred Katayama reports.

More signs on Wednesday that the U.S. economic recovery is sputtering.

Consumer spending – the biggest driver of economic activity – fell for the first time since the recovery began in May.

The Commerce Department reported that personal spending fell 0.4% in November as Americans cut back on purchases of cars, clothing and shoes and spent less at restaurants and bars.

That offset increases in spending at supermarkets and liquor stores.

Less spending was coupled with a plunge in personal income – which declined 1.1% last month.

That dip reflects the expiration of a government loan program for businesses hurt by the pandemic.

A third Commerce report showed business spending rose but the pace has slowed.

Separately, the Labor Department reported Wednesday that the number of Americans filing first-time claims for jobless benefits unexpectedly fell last week to 803,000.

But that’s still historically high, well above the peak of 665,000 claims filed during the Great Recession.

In a day flooded with economic news, sales of new homes fell more than expected in November.

These reports come on the heels of data on Tuesday showing existing home sales declined last month and consumer confidence slumped to a four-month low in December.

Delays by Congress passing another rescue package - now thrown into disarray by President Trump’s threat of a veto - and the surge in coronavirus cases that has led to new business restrictions have sapped energy from the economy as a brutal year draws to a close.