The numbers: Consumer spending rose a tepid 0.1% in November, suggesting greater caution by households and heavy discounting in the holiday shopping season.
Analysts polled by The Wall Street Journal had forecast a 0.2% increase.
Key details: Americans spent less on goods in November, especially new cars and trucks. Higher interest rates have put a dent in car sales while excess inventories forced companies to cut the prices of other products.
Consumers may have also started their holiday shopping early, economists say. Spending rose a sharper 0.9% in October.
Spending on services, meanwhile, increased again. Americans are spending more on things like recreation and travel and not buying as many goods as they were during the pandemic when they were cooped up at home.
The U.S. savings rate rate edged up to 2.4% last month from 2.2%, which was the second lowest savings rate on record going back to 1959.
Households have dipped into their savings to support their spending habits because incomes are not rising as fast as inflation.
The so-called PCE price index is up 5.5% in the past year. And the better known consumer price index has risen 7.1% in the same span.
Big picture: Consumer spending is the main engine of the economy, but it might be starting to sputter in the face of rising interest rates. The Federal Reserve has jacked up rates to try to tame inflation.
What’s likely to keep spending going up for the time being is a strong jobs market. If layoffs increase and unemployment rises, however, the economy is bound to suffer.
Higher borrowing costs depress the economy by making it more expensive to buy a home or car or take out a loan.
Looking ahead: “It seems reasonable to expect people to become more cautious, now that they have run down about half of their accumulated pandemic savings, and labor market conditions are softening,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.