Consumer Spending Remains Steady

According to the Bureau of Economic Analysis, real consumer spending in December 2014 was $11,132 billion real dollars (seasonally adjusted at an annual rate). The month-over-month rate of growth in consumer spending was 2.8%. This rate of change has been between 2.7% and 2.9% the last five months. That's an improvement over the previous five months but not by much.

Real disposable income, a good leading indicator for real consumer spending, has been growing at an accelerating rate throughout 2014. The month-over-month rate of change has gone above the historical average for the first time in roughly three years. So, the annual rate of change seems poised for further accelerating growth. But, because of the relative over spending comapred to incomes in 2013 and 2014, it may be awhile before significant growth in incomes results in significant growth in consumer spending. 

While total consumer spending has been growing at a consistent rate, real consumer durable goods spending is on a tear in recent months. In December, durable good spending increased 9.5% compared with last December. That's the fastest rate of month-over-month growth since February 2011. The annual rate of change made a significant jump to 7.0% in December. That's the fastest rate of annual growth since November 2013. Finally, for the third time in five months durable goods spending has accounted for more than 15% of non-durable goods spending. Those are the only three months where that metric has ever been above 15%. That's largely due to the falling real 10-year treasury rate.

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.