US economy showing signs of improvement
The 0.2 per cent increase would follow a 0.3 per cent gain in November, according to the median forecast of 72 economists surveyed by Bloomberg before the US Commerce Department's figures on Tuesday.
Other reports are projected to show home building picked up, manufacturing expanded and the cost of living remained contained.
The housing-market rebound, higher share prices and an improving job market are helping sustain consumer spending, which accounts for about 70 per cent of the economy. At the same time, households may be hard pressed to accelerate purchases as higher payroll taxes shrink take-home pay.
"Consumers have proven to be fairly resilient, though a little cautious," the chief economist at Action Economics, Mike Englund, said. "People will be stunned at how small their pay cheques are when they get them this month." Still, "the economy will muddle through".
The fiscal pact passed by the US Congress on January 1 made permanent the George W. Bush-era income tax cuts for 99 per cent of Americans. The agreement also let the payroll tax used to pay for social security benefits return to the 2010 level of 6.2 per cent, from 4.2 per cent. That reduces the pay cheque by $US41.67 ($A39.53) for someone who earns $US50,000 and gets paid twice a month.
Better job and wage prospects will cushion some of the hit. Payrolls rose by 155,000 workers last month after a 161,000 advance in November.
Frequently Asked Questions about this Article…
Economists expected US retail sales to rise about 0.2% in December after a 0.3% gain in November, according to a median forecast of 72 economists surveyed by Bloomberg. That pickup — helped by holiday shopping and strong car sales — is a sign consumer activity was holding up at the end of the year.
Consumer spending accounts for roughly 70% of the US economy. The article notes that housing-market gains, higher share prices and an improving job market have been helping to sustain that spending.
A fiscal deal returned the payroll tax to 6.2% from 4.2%, which reduces take-home pay. For example, someone earning US$50,000 paid twice a month would see about US$41.67 less per paycheck, which could constrain household spending.
Payrolls rose by 155,000 in the most recent month after a 161,000 increase in November. The article says better job and wage prospects will help cushion the impact of higher payroll taxes on consumers.
Yes. Reports cited in the article projected that home building picked up, manufacturing expanded and the cost of living remained contained. Also, car dealers closed out what were described as the best two months for sales since 2008.
The piece quotes Action Economics chief economist Mike Englund saying consumers have been fairly resilient but cautious. While higher taxes will pinch paychecks, the overall view in the article is that the economy is likely to 'muddle through' rather than sharply deteriorate.
The outlook referenced a Bloomberg survey of 72 economists for the retail-sales forecast and anticipated data from the US Commerce Department. Other government and industry reports were cited for housing, manufacturing and cost-of-living trends.
The article notes that higher share prices help support consumer spending by boosting household wealth. For investors, that can mean consumer-facing sectors may get support from rising equity markets, although higher payroll taxes could offset some spending growth.
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