Consumer spending slowed sharply in the US, official figures showed yesterday, as the country's most powerful consumer products groups warned that a slowdown would crimp profits in the coming months.
Procter & Gamble – makers of a raft of household name brands, including Gillette, Ariel and Pringles – said it was already seeing a "modest" deceleration in the US and was finding most of its growth overseas.
The federal government's commerce department reported that consumer spending was up just 0.2 per cent in December, an abrupt decline from the 1 per cent rate of growth the previous month. It was the worst reading in six months and took growth for last year as a whole to 5.5 per cent, the slowest year since 2003.
The data was accompanied by news of a steeper-than-forecast rise in unemployment claims last week, which may presage even more pressure on spending.
Investors examined a slew of quarterly corporate earnings statements for clues as to the likely direction of consumer spending, which accounts for 70 per cent of the US economy and which has so far held up despite the woes in the housing market.
Robert Selander, chief executive of Mastercard, said that most of its forecast-busting growth in the past three months had come from overseas. "Over the past several months, consumers have moved away from discretionary items such as jewellery, full-service restaurants and home furnishings for everyday purchases including gasoline, grocery and personal health care items," he said.
Procter & Gamble lowered its earnings guidance for the first three months of this year, reflecting how high commodities prices are squeezing it from all sides. Rising raw materials costs and factory energy bills are making it difficult to improve margins, while high petrol prices are one reason for weaker consumer spending.
However, Colgate-Palmolive posted better than expected figures yesterday and signalled it saw little slowdown in the US. Burger King, too, contradicted McDonald's assertion earlier this week that consumers were more reluctant to splash out on fast food in December.Reuse content