Consumer Spending Makes a Comeback
One of the bright spots in today's report on Personal Income and Outlays was the significant improvement in May for real personal consumption expenditures, especially for durable goods (cars, appliances, business equipment, electronic equipment, home furnishings and fixtures, housewares, photographic equipment, recreational goods, sporting goods, etc.).
Compared to last May, real consumption expenditures increased last month by 2.6%, which is the highest year-to-year gain since August 2007, 33 months ago (see top chart). For durable goods the annual increase in May was 11.4% compared to last year, following an 11.5% increase in April. The last time consumer expenditures on durable goods increased by more than 11% was in July 2005, and the last time there were two consecutive monthly increases above 11% was in 2002 (see chart above).
These increases in consumer expenditures, especially for "big-ticket items," are consistent with the last week's report on consumer sentiment, which just reached its highest level this month since January of 2008.