Consumers pulled back their spending in December, as spiraling coronavirus caseloads kept many Americans at home late in the holiday season.
Spending fell 0.6 percent last month, the first decline since February, the Commerce Department said Friday. Rapidly rising prices meant that spending, adjusted for inflation, fell 1 percent.
The decline offered some of the clearest evidence yet of how the spread of the Omicron variant is affecting the economy. Forecasters expect the toll to worsen in January, when a record-breaking jump in cases kept millions of people home from work.
Still, Omicron may not have been the only factor in the December slump. Spending on services — the part of the economy hit hardest by the pandemic — actually rose last month, though more slowly than in the fall. Spending on goods, however, fell. That may reflect supply chain issues, either directly — as consumers struggled to find the products they wanted — or indirectly, as holiday shoppers shifted their spending to earlier in the fall to make sure their gifts arrived on time.
So far, at least, there is little evidence that Omicron has done more lasting damage to the economy. Personal income rose 0.3 percent in December, led by an 0.7 percent increase in wage and salary income, suggesting that employers continued to hire workers and offer raises despite the latest Covid wave.
Households, in the aggregate, should have plenty of money to spend once Omicron fades. The combination of rising income and falling spending pushed up the personal saving rate to 7.9 percent. Americans collectively have accumulated roughly $2.5 trillion in extra savings during the pandemic, the result of reduced spending and increased government aid.
Not all families are so fortunate, however. Savings for lower-income households have dwindled in recent months, according to data from the JPMorgan Chase Institute. And December was the last month in which families received monthly payments through the expanded Child Tax Credit, which expired at the end of the year.
