Consumer Spending Declines for Second Month
According to the Bureau of Economic Analysis, real consumer spending in May 2014 was $10,888 billion real dollars (seasonally adjusted at an annual rate). This is the second month in a row that the level of consumer spending has declined, and consumer spending was generally revised lower for the first five months of 2014. One of the significant reasons for revision was that medical care spending was dramatically overstated in the first four months of 2014.
Spending in May 2014 was 1.9% more than it was in May 2013. This is the second month in a row that the month-over-month rate of change has decelerated. And, the rate of change is growing at its slowest rate since July 2013. The annual rate of growth held steady at 2.1%, which is the fastest rate of annual growth since April 2013. However, if monthly spending continues to grow at a slower, then it will not be long before the annual rate of change rolls over and grows at a slower rate as well.
Real disposable income, a good leading indicator for real consumer spending, has been growing faster for five months. However, the rate of growth of growth is relatively anemic in historical terms. The rate of change in income looks like it will peak soon, which would indicate that the rate of change in in spending will be peak some time in the second of 2014.
While total consumer spending has been growing significantly slower than the historical average rate, real consumer durable goods spending has been growing faster than the average hsitorical rate. In May, consumer durable goods spending reached an all-time high, and the rate of growth compared to one year ago was the second fastest since November 2013. Annually, the rate of growth has decelerated for seven months, but it looks like the rate of growth may flatten out soon.
Real consumer spending (or its sub-components such as medical care spending) is an important leading for a number of durable goods end markets: construction materials; custom processors; durable goods; food and beverage processing; forming and fabricating (non-auto); hardware; HVAC; industrial motors, hydraulics and mechanical components; machinery and equipment manufacturing; medical; metalcutting job shops; oil, gas field and mining machinery; power generation; primary metals; and printing.
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