U.S. consumer spending tumbled 0.5 percent in December, the biggest decline in nine years, as the holiday shopping season ended in disappointment. Meanwhile, incomes rose sharply in December but edged down in January.

The fall in consumer spending followed sizable gains of 0.7 percent in October and 0.6 percent in November, the Commerce Department reported Friday. December’s result means that spending for the quarter decelerated significantly, a primary factor in the slowing of overall economy in the final three months of the year. Gross domestic product recorded a growth rate of 2.6 percent after a 3.4 percent gain in the third quarter.

Incomes jumped 1 percent in December, though slipped 0.1 percent in January. The government did not release spending data for January because of delays stemming from the government shutdown.

The big fall in spending reflected sizable declines in purchases of durable goods such as autos, as well as nondurable goods such as clothing during the all-important holiday shopping season. The result shows that consumer spending, which accounts for 70 percent of economic growth, was showing significant weakness heading into the current quarter.

Many economists believe that GDP growth will slow further during the current January-March period, with some expecting GDP to drop to a growth rate of 2 percent or lower.

Inflation, as measured by a gauge preferred by the Federal Reserve, was up 1.7 percent for the past 12 months ending in December. That’s the slowest 12-month pace since a similar 12-month gain for the period ending in October 2017 and is below the Fed’s 2 percent target for annual price increases.

Federal Reserve Chairman Jerome Powell told Congress this week that with a number of economic risks facing the country and with inflation so low, the central bank intends to be “patient” in deciding when to change interest rates again.

The move to a prolonged pause in further rate hikes, which the Fed had announced at its January meeting, has cheered financial markets which had been worried that the central bank, which hiked its benchmark rate four times last year, could move rates up too quickly, raising the risks of an economic downturn.

The spending and income report showed that the saving rate jumped to 7.6 percent of after-tax income in December, compared to 6.1 percent in November. That was the highest saving rate since January 2016.
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Oregon Gov. Kate Brown signed the nation’s first statewide mandatory rent control measure on Thursday, giving a victory to housing advocates who say spiraling rent costs in the economically booming state have fueled widespread homelessness and housing insecurity.  

Brown, a Democrat, said the legislation will provide “some immediate relief to Oregonians struggling to keep up with rising rents and a tight rental market.” 

Landlords are now limited to increases once per year that cannot exceed 7 percent plus the change in the consumer price index, which is used to calculate inflation. 

The law prohibits them from serving no-cause evictions after a tenant’s first year of occupancy, a provision designed to protect those who are living paycheck to paycheck and who affordable housing advocates say are often most vulnerable to sudden rent hikes and abrupt lease terminations. 

New York has a statewide rent control law, but cities can choose whether to participate. California restricts the ability of cities to impose rent control. Last November, voters defeated a ballot initiative that would have overturned that law. 

Emergency measure

The Oregon law takes effect immediately. Democrats who control the Legislature say the state’s housing crisis justified passing the bill as an emergency measure. 

In hearings for the bill passed, tenants testified that they have struggled to keep up with skyrocketing rents, with many said they’ve been forced from their homes. Kori Sparks, a resident of the fast-growing city of Bend, said she relies on disability and has “to deal with the stress of losing an accessible home on short notice.” 

She said rent control will protect vulnerable people from “a predatory system where profit comes before people and denies them of a basic human right.”  

Builders in Oregon have not been able to construct enough houses and apartments to meet the demands of the thousands of people moving to the state for jobs and, in some cases, for a lower cost of living. Many people move to the state from California. 

A state report estimated that a renter would need to work 77 hours a week at minimum wage to afford a two-bedroom apartment. One in three renters in Oregon pays more than 50 percent of his or her income for rent, far higher than the congressionally set definition of housing affordability, which suggests setting aside 30 percent toward rent.   

In the Portland metropolitan area, rent began to plateau in 2017 after four consecutive years of rent hikes averaging 5 percent or more. The average rental unit costs about $1,400 a month, according to data released by the city.  

Many are homeless

Oregon is also suffering from a lack of affordable housing and has one of the highest rates of homelessness in the country. 

Landlords and developers argued that rent control would make the housing crisis worse, saying investors will now be less willing to build or maintain properties.  

“History has shown that rent control exacerbates shortages, makes it harder for apartment owners to make upgrades and disproportionately benefits higher-income households,” said Doug Bibby, president of the National Multifamily Housing Council, a national association representing apartment building owners. 

The governor acknowledged that rent control alone isn’t enough, and that the state needs an “all hands on deck” solution. Brown has proposed a $400 million investment in affordable housing solutions in her two-year budget proposal. 

“It will take much more to ensure that every Oregonian, in communities large and small, has access to housing choices that allow them and their families to thrive,” she said. 
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Tesla says it is now taking orders for the long-awaited $35,000 Model 3, will close stores and move to online orders.

Tesla says it is now taking orders for the long-awaited $35,000 Model 3, a car for the masses that is essential for the company to survive.

The company says to reach the lower price, it’s shifting all sales worldwide from stores to online only. Some high-traffic stores, however, will remain open.

The company will offer the standard base model, which can go 220 miles (350 kilometers) per charge. It also will offer a $37,000 version with a premium interior that accelerates faster and can go 240 miles (385 kilometers) per charge.

Tesla started taking orders for the Model 3 in March of 2016, but until now hasn’t been able to cut costs enough to sell them for $35,000 and make a profit.

The cheapest one that could be ordered until Thursday started at $42,900.

 
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Gap Inc. said Thursday that it would separate its Old Navy brand into a publicly traded company in order to focus on its struggling namesake apparel business, sending its shares up 18 percent. 

Old Navy has had a better success than the Gap brand in recent years as a wide range of budget apparel has made it more appealing to a broader base of consumers. 

“It’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time,” Gap’s Chairman Robert Fisher said. 

The company also said it planned to close 230 Gap specialty stores over the next two years. 

Gap’s overall same-store sales fell 1 percent in the fourth quarter ended Feb. 2, compared with analysts’ average estimate of a 0.3 percent rise, according to IBES data from Refinitiv. 

Gap, Athleta, Banana Republic and the remaining brands will be part of a yet-to-be-named company. The separation is expected to be completed by 2020, Gap said. 

The company’s shares were up 17.7 percent at $29.89 in extended trading.
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