Holiday Hangover: Consumer Spending Contracts in January
Consumers couldn’t carry the economy on their shoulders forever. Gallup’s survey of self-reported consumer spending fell to $78 per day in January, down from a five-year high of $96 per day in December and down slightly from $80 per day in January 2013. It’s the first time average daily spending was below $80 since November 2012.
The January slump in self-reported daily spending “is fairly typical of the post-holiday dip Gallup has seen each year since 2010,” the polling company reports. Each year, spending accelerates through the holiday season and then declines fairly dramatically in January. Spending generally accelerates again through about the middle of the year before tapering off in apparent anticipation of the year-end spending season.
January’s slump follows a particularly strong fourth quarter of consumer spending. Gallup’s poll puts consumer spending up 15.7 percent on the year in December, while the Commerce Department reports that consumer spending rose by 3.7 percent. According to the U.S. Bureau of Economic Analysis, personal consumption expenditures increased 0.2 percent in December (or +0.4 percent, adjusted for inflation). For the final quarter of the year, the holiday shopping season, personal outlays increased 4 percent. This compares against marginal increases in personal income.
The dramatic year-end acceleration and the subsequent deceleration in spending was primarily fueled by spending from upper- and upper-middle income households, according to Gallup. Daily spending from households with income greater than $90,000 per year increased 10.8 percent, from $157 to $174, between November and December 2013, and fell 21.3 percent between December and January, ending at $137, down 12.7 percent from its November level.
Daily spending from households with income between $60,000 and $89,999 increased 12.2 percent, from $98 to $100, between November and December, and fell 31.8 percent between December and January, ending at $75, down 23.5 percent from its November level.
Daily spending from households with income between $24,000 and $59,999 increased 9.9 percent, from $81 to $89, between November and December, and fell 19.1 percent between December and January, ending at $72, or 11.1 percent below its November level. Daily spending from households with income below $24,000 actually fell 3.1 percent from $64 to $62 between November and December, and fell 3.2 percent between December and January, ending at $60, down 6.3 percent from its November level.
This discrepancy in the relative expansion and contraction of spending is normal and indicative of how households in different income brackets participate in the economy. Spending during the holiday shopping season depends more on wealthier households with enough discretionary income to increase spending. Spending from households on the lower end of the income scale may have decreased because of higher utility bills, which take up a larger share of total income in lower income brackets than in higher income brackets.
Gallup concludes that while the January spending contraction is normal, the magnitude of the decline was somewhat high. Both December spending was high and — perhaps as a direct result — average spending in January was relatively low.