Consumer spending and consumer confidence both trending down as inflation worries trend up.

A decline in consumer spending and consumer confidence suggest the nation’s economic recovery may be headed for a plateau. The Wall Street Journal reports

Rising inflation and the spread of the Omicron variant dented household spending, a key engine of economic growth, headed into 2022.

Consumer outlays declined by 0.6% in December from the prior month, the first decrease since last winter, the Commerce Department said Friday.

Meanwhile, prices continued to climb.

It’s not all gloom.

The easing of consumer spending comes despite strength in other areas of the economy. The unemployment rate was a low 3.9% in December and workers’ wages grew, while U.S. gross domestic product increased at a strong 6.9% annual rate in the final quarter of 2021, as consumers front-loaded holiday spending and businesses restocked shelves after months of pandemic-related disruptions.

Yet, the WSJ also reports on a decline in consumer confidence that accompanied the closed wallets.

Consumer perception of current economic conditions in December was almost even with April 2020 levels, when sentiment bottomed out following the first major restrictions to control the coronavirus pandemic.

While Americans’ feelings about their personal finances slid through much of 2021, concerns about buying conditions—amid continuing worries about inflation—fell drastically for much of the year.

Household income has declined from spikes that occurred as the government distributed pandemic-related stimulus. Still, many Americans have seen wages and benefits increase, as the economy rebounded from earlier disruptions from the pandemic.

At the same time, decades-high levels of inflation have tempered enthusiasm for spending.

The University of Michigan has seen less enthusiasm for large purchases during the pandemic, with 41% of consumers citing high prices as a reason not to buy in December

University of Michigan economist Richard Curtin writes,

Sentiment fell throughout January, posting a cumulative loss of 4.8%, sinking to its lowest level since November 2011. The current slump was due to two sharp declines separated by a brief interlude of rising optimism. The initial steep decline occurred in just two months, a 28.9% plunge in optimism from February to April 2020 due to the shutdown in the economy. Confidence recorded an equally strong recovery beginning in late-2020, rising 23.0% by April 2021. That upturn was reversed during the past nine months, with the Sentiment Index falling by 23.9%. The Delta and Omicron variants were largely responsible, but other factors, some of which were initially triggered by covid, have become independent forces shaping sentiment. While supply chains and essential workers have sparked the initial increases in prices and wages, a wage-price spiral that has subsequently developed is no longer tied to those precipitating conditions. Household spending had been supported by an extraordinary pace of rising home and stock prices that is likely to turn negative in the year ahead. Overall confidence in government economic policies is at its lowest level since 2014, and the major geopolitical risks may add to the pandemic active confrontations with other countries.

More at the link. Washington Research Council economist Kriss Sjoblom has tracked personal income, savings, and consumer spending throughout the pandemic. His latest update is here.

Overall, it looks like consumers are coming out of the gate slawly in 2022.