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Consumer Spending Growth Decelerates for Third Month
Despite accelerating growth in disposable income, consumer spending is growing slower due to an increase in the savings rate.
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Real consumer spending in April 2015 was $11,191 billion real dollars (seasonally adjusted at an annual rate). While first quarter income data was revised up, consumer spending data was generally revised down. The month-over-month rate of growth in consumer spending was 2.7%. This was the third straight month that the month-over-month rate of growth decelerated. Also, this was the slowest rate of growth since July 2014. Even thought incomes are growing faster spending is growing slower because consumers are saving more of their income. The annual rate of change was unchaged at 2.7% for the third consecutive month. It appears that consumer spending may have hit its peak rate of growth. Also, the current rate of growth remained below the historical average. In fact, the annual rate of growth in consumer spending has not been above average since May 2006.
It had been a somewhat different story for consumer durable goods spending but not durable goods spending is seeing decelerating growth too. The month-over-month rate of change has been below average the last two months, which is the first time it has been below average since February 2014. The annual rate of change has decelerated the last two months to 7.5 percent, but it is still above its historical average growth rate of 5.5 percent. As a percent of all consumer spending, durable goods spending was still near record levels in April.
It appears we have seen the peak rate of growth in both general consumer spending and durbale goods spending 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.
