U.S. disposable income falls and inflation-adjusted spending weakens, Gregory Daco notes

U.S. disposable income falls and inflation-adjusted spending weakens, Gregory Daco notes
U.S. consumer spending weakens further

U.S. consumers are showing signs of strain as spending growth slows and savings rates decline. Gregory Daco highlights that consumer spending rose by 0.5%, with inflation-adjusted growth just 0.1%. Disposable income edged down by 0.1%, and inflation-adjusted disposable income dropped by 0.5%. The savings rate fell to 4.0%, down by 0.5 percentage points.

Headline PCE inflation held steady at 2.8%, while core PCE inflation eased to 3.0%.

Daco recently noted that U.S. real GDP grew 0.7 percent in the fourth quarter as a government shutdown weighed on activity and inflation reached 2.8 percent year over year, according to a recent report. In a separate analysis, he indicated that U.S. CPI held steady at 2.4 percent, with risks stemming from tariff passthrough and potential oil price shocks outlined in his earlier commentary. These trends provide context for the ongoing pressures facing U.S. consumers.

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