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Consumers, the backbone of the American economy, continued to spend in December, but the rate of spending growth is continuing to slow, according to a survey from the Federal Reserve Bank of New York.
The median increase in monthly household spending, compared with a year ago, dropped to 5.0% in December 2023, from 5.5% in August, and 7.1% in December 2022, the New York Fed said. However, that compares with the prepandemic level of 2.5% in December 2019.
59.7% of households reported making at least one large purchase in the last four months, down from 63.5% in August, but above 56.4% in December 2022.
Expectations of spending growth also eased. Median expected growth in monthly overall household spending over the next year decreased to 3.0% from 3.4% in August, its lowest reading since December 2020.
The average reported likelihood of making a large purchase over the next four months declined in December for home appliances, electronics, furniture, home repairs, vehicles, and vacations but increased for buying a home, the New York Fed said.
When asked what they would do with an unexpected 10% increase in income, an average 38.4% would be used by households to pay down debt, up from 33.8% in December 2022 and the highest reading since August 2016. On average, 45.6% would be saved or invested, down from 47.7% in the previous year, and 16.0% would be spent or donated, down from 18.5% in the prior year and the lowest reading since the series began in August 2015.
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