More Consumer Spending

According to the U.S. Department of Commerce on Monday, consumer spending ticked upward by 0.5 percent in January. The gain followed a 0.3 percent increase in December, and was more than economists expected.

March 2, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Franco Folini

According to the U.S. Department of Commerce on Monday, consumer spending ticked upward by 0.5 percent in January. The gain followed a 0.3 percent increase in December, and was more than economists expected.

Durable goods purveyors, such as the much-beaten auto and furniture sectors, saw a spending increase of 0.7 percent in January, on the heels of a 0.6 percent increase in December. Purchases of non-durable goods grew 0.8 percent, while services only eked out a 0.1 percent increase.

Except for services, all well and good, since consumer spending is two of the three pillars holding up the entire economy. But personal income also eked out a small 0.1 percent gain in January, which might mean that spending growth will slow down in the coming months, since access to credit isn’t quite what it used to be.

Construction Still Sluggish

The Commerce Department released construction spending data on Monday as well. Unlike consumer spending, construction spending dropped 0.6 percent, following a 1.2 percent drop in December. Those are seasonally adjusted numbers, so the lousy weather isn’t to blame.

Home construction was actually up for the month by 1.1 percent. since some people are out buying new homes again. But that wasn’t nearly enough to balance out the decline in commercial projects: 1.4 percent. Few want new offices or shops, after all; or more to the point, few want to risk developing them or risk lending money to develop them.

Private construction spending dropped 1.3 percent in January, but perhaps more surprisingly public outlays also declined, by 0.7 percent. In the 12 months ending in January, total construction was down by 9.3 percent.

Few Quarters Left for GGP?

General Growth Properties may be producing few more quarterly reports, but for now the REIT is issuing them. Among other things, GGP reported a net loss for 4Q09 of $612.3 million, or $1.96 per share, compared to a loss of $6.53 million, or $0.02 per share a year ago. Funds from operations, an important REIT metric, was down $413.9 million for GGP during the fourth quarter, compared with up $215.5 million during 4Q08.

So it’s been a long slide down for General Growth. The company has, however, managed to restructure $10.65 billion in mortgage debt since going bankrupt almost a year ago.

Still, the short future of the company is contained in the following statement by the GGP on Monday: “The company is now in the midst of the second phase: deleveraging its corporate capital structure and resolving its $6.5 billion of unsecured corporate debt. GGP has commenced a process to explore all potential alternatives for emergence from bankruptcy.” Including trying to fan a bidding war among suitors.

Wall Street had a fairly good day on Monday, with the Dow Jones Industrial Average up 78.53 points, or 0.76 percent. The S&P 500 saw even bigger gains of 1.02 percent, and the Nasdaq advanced 1.58 percent.