Tuesday, August 03, 2010

Real Consumption Growth Highest Since 2007

From Table 10 in today's BEA report on Personal Income and Outlays, the graph above shows the percent change from a year earlier in Real Personal Consumption Expenditures, monthly from December 2006 to June 2010.  Most of the news reporting focuses more on month-to-month changes, with the resulting "gloom and doom" headlines like "Flat consumer spending adds to recovery worries," with commentary like "Consumer spending and incomes were unexpectedly flat in June implying an anemic economic recovery for the remainder of this year."

Looking at real consumer spending over a longer period of time like a year, the picture is not quite so gloomy.  The graph above shows that consumer spending (percent change from a year earlier) slowed consistently through 2007 and 2008, reached a bottom in the spring of 2009, and has been improving consistently since last summer, when the recession most likely ended.  The growth in real consumer spending has been positive for the last seven months on an annual basis, and reached a 31-month high in June of 1.7%, the highest growth rate in real consumer spending since November 2007.   


At 8/03/2010 9:38 AM, Blogger morganovich said...

first off, they are still well under 2%, which is a pretty punk number by historical standards. scott grannis et al are going to have a tough time getting to 3-4% with a 1.7% consumption growth number.

looking at it over a year is still using the easy comparison of the recession. the reason you use sequential numbers is to see the trends earlier.

it's awfully early in a "recovery" to see numbers flatten.

At 8/03/2010 9:43 AM, Blogger Marko said...

The wealthiest Americans account for one half of consumer spending, and they are increasing their savings instead of spending more. I believe this is because of coming tax increases.

So to improve the situation, we need the wealthy to start spending again, and to do this we need to stop demonizing them, threatening them with increased taxes and creating uncertainty.

While things may be slightly better than last year when they were very bad, if we don't cut taxes on the wealthy and businesses, this economy will continue to limp along and unemployment will continue to be stagnant. We need a leader that is willing to admit we need the wealthy and businesses and stop attacking them.

At 8/03/2010 10:37 AM, Blogger morganovich said...

the real year to year test is going to be the august number.

looking at the chart, june was the last month of the deep trough. by july we were seeing the start of recovery.

by august 2009, you had seen a real pickup in spending. the question is "how will we comp against it".

my bet is "not so well".


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