US: Not the start of a collapse in spending - Wells Fargo

Today data on personal income and spending showed lower-than-expected numbers. Analysts at Wells Fargo, point out that the bad news is that December real consumer spending nosedived 0.6%, the biggest one-month drop since the recession year of 2009. They see that consumers face some headwinds, but they don’t see this is as the start of a collapse in spending. 

Key Quotes: 

“After an already-released retail sales report showed a big drop in December, the consensus was braced for a 0.3% decline. The actual outturn was twice as bad, as real spending dropped 0.6%. We are highly suspicious of the December data.”

“There are some headwinds for consumers. Markets have been volatile, the shutdown added to uncertainty and there is some evidence that tax refunds might be slightly behind schedule. We anticipate moderation rather than outright declines in consumer spending this year. Personal income was down in January, which may reflect the shutdown, or more likely an inevitable giveback after an upwardly revised surge of 1.0% in December.”