Consumer spending dips 0.2 percent in second drop in two months

Consumer spending in December dropped 0.2 percent, the second monthly decline in two months and a sign the economic recovery is slowing amid rising coronavirus cases over the fall and winter.

The December drop followed a steeper 0.7 percent decline in November, according to the Commerce Department. Personal income rose by 0.6 percent in December.

Those diverging figures point to something of a paradox linked to the pandemic.

The increase in income was partly related to the renewal of government social benefits, such as emergency unemployment provisions and stimulus checks.

But the unprecedented outbreak of COVID-19 that followed Thanksgiving has also pushed people to stay home and spend less.

Economists point to stimulus checks, in particular, as a policy that has pushed money into the pockets of some people who haven’t seen their incomes drop.

Those people are more likely to save up their funds, rather than spend them on necessities the way people who have lost income would.

Once the pandemic dies down and the economy reopens more fully, people could use those saved-up funds to satisfy pent up demand.

All in all, the data paints a picture of an economy struggling to restart. On Thursday, the Commerce Department said that the economy contracted 4 percent in 2020, its first contraction in over a decade and its largest in 74 years.