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Growth in Consumer Spending Slows for Second Month
Total consumer spending growth has been below average since May 2006 while consumer durable goods spending growth remains nearly 50% above average.
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Real consumer spending in March 2015 was $11,193 billion real dollars (seasonally adjusted at an annual rate), which was an all-time high. The month-over-month rate of growth in consumer spending was 2.7%. This was the second straight month that the month-over-month rate of growth decelerated. Also, this was the slowest rate of growth since July 2014. The annual rate of change was unchaged at 2.7%. It appears that consumer spending may have hit its peak rate of growth. Also, the current rate of growth was below the historical average. In fact, the annual rate of growth in consumer spending has not been above average since May 2006.
It's a somewhat different story for consumer durable goods spending though. While the annual rate of change decelerated slightly in March, it was still almost 50% above the historical average. And, consumer durable goods spending was 13.1% of all consumer spending in March. This figure is virtually an all-time high and has increased dramatically as the Fed has kept interest rates at all-time lows. In March, consumer durbale goods spending increased 5.5%, which is about the historical average. However, the rate of growth has decelerated the last two months. It appears that we have seen the peak rate of growth in real consumer durable goods spending.
Spending does lead production by 0 to 6 months. Therefore, we could see production grow faster through the summer. But, given the trend in other leading indicators, I think we have seen the peak rate of growth in durable goods production this cycle.
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/beverage processing; forming/fabricating (non-auto); hardware; HVAC; industrial motors/hydraulics/mechanical components; machinery/equipment manufacturing; medical; metalcutting job shops; oil/gas field/mining machinery; power generation; primary metals; and printing.
