Tepid Consumer Spending: December 1 – 5

Consumer spending and industrial production paused in September. Here are five things we learned from U.S. economic data released during the week ending December 5.

Personal spending remained steady in September. Real Personal Consumption Expenditures (PCE) were unchanged on a seasonally adjusted basis, marking the first time in four months that the Bureau of Economic Analysis measure did not increase. Spending on goods declined 0.4 percent, with decreases in both durables (-0.6 percent) and nondurables (-0.3 percent). Services expenditures grew 0.2 percent. Without adjustments for inflation, nominal PCE increased by 0.3 percent, driven by higher nominal personal income (+0.4 percent) and disposable income (+0.3 percent). After accounting for inflation, real disposable income rose 0.1 percent. Over the past year, real personal spending has grown 2.1 percent, supported by a 1.9 percent gain in real disposable income. The personal savings rate remained at +4.7 percent. The same report included the closely watched PCE price index, which increased 0.3 percent. Removing food and energy, the core PCE price index grew 0.2 percent. Both measures have increased 2.8 percent over the past year. 

Manufacturing production was stagnant in September. The Federal Reserve reported that industrial production remained unchanged on a seasonally adjusted basis, following modest gains of 0.3 percent, 0.2 percent, and 0.1 percent in the previous three months. Manufacturing production was 1.5 percent higher than year-ago levels. Overall industrial production increased slightly by 0.1 percent in September after declining 0.3 percent the month before. Industrial production was 1.6 percent above its year-ago pace. Mining output remained steady, while utilities output grew by 1.1 percent. Manufacturing capacity utilization fell by 1/10^th of a percentage point to 75.5 percent, below the 53-year average of 78.2 percent. 

The manufacturing sector slowed again in November. The Manufacturing PMI, from the Institute for Supply Management, dropped by half a point to 48.2. This marked the ninth consecutive month where the index stayed below 50.0, the threshold between growth and contraction in the manufacturing sector. While measures for production (51.4) and inventories (48.9) increased, those for new orders (47.4) and employment (44.0) decreased. Only four manufacturing industries expanded in November, including computers/electronics, food and beverages, and machinery. Eleven industries contracted. The press release noted that 58 percent of manufacturing’s contribution to GDP shrank during the month. 

Meanwhile, the service sector experienced a bit more activity in November. The ISM’s Services PMI edged up 2/10^ths of a point to 52.6. This was the Services PMI’s second consecutive month (and the ninth time this year) being above the expansion-contraction threshold of 50.0. Improving were measures for business activity/production (54.5), employment (48.9), and inventories (53.4). The new orders declined by 3.3 points to 52.9. Twelve service-sector industries reported growth in November, led by retail, arts/entertainment, and accommodation/food services. Survey respondents noted that “tariffs and the government shutdown” had been impacting demand and costs.  

Consumer sentiment crept up in early December. The University of Michigan’s Index of Consumer Sentiment rose by 2.3 points to a seasonally adjusted 53.3 (1966Q1=100). The index was still 28.0 percent below year-ago levels. The current conditions index slipped 4/10^ths of a point to 50.7 (-32.5 percent compared to December 2024), while the expectations measure gained 4.0 points to 55.0 (-25.0 percent versus December 2024). The press release noted that younger survey respondents contributed to the rise in the headline number. Inflation expectations eased slightly (albeit at elevated levels) with one-year inflation at +4.1 percent (down 4/10^ths of a percentage point) and longer-term inflation at +3.2 percent. 

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending November 29, 2025, First-Time Claims, seasonally adjusted): 191,000 (-27,000 vs. the previous week, -34,000 vs. the same week a year earlier). 4-week moving average: 214,750 (-1.9% vs. the same week a year earlier).
• Factory Orders (September 2025, New Orders for Manufactured Goods, seasonally adjusted): $612.6 billion (+0.2% vs. August 2025).
• Import Prices (September 2025, All Imports, not seasonally adjusted): Unchanged vs. August 2025, +0.3% vs. September 2024. Nonfuel Imports: +0.2% vs. August 2025; +0.8% vs. September 2024).
• Export Prices (September 2025, All Exports, not seasonally adjusted): Unchanged vs. August 2025; +3.8% vs. September 2024. Nonagricultural Exports: Unchanged vs. August 2024; +3.7% vs. September 2024.
• Consumer Credit (October 2025, Consumer Credit Outstanding (non-real estate), seasonally adjusted): $5.084 trillion (+9.2 billion vs. September 2025; +0.3% vs. October 2024).
• Vehicle Sales (November 2025, Sales of Autos and Light Trucks, seasonally adjusted annualized rate): 15.596 million (+2.0% vs. October 2025; -5.6% vs. November 2024.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.