U.S. Consumers Are Still Consuming
Ed Yardeni | Jun 29, 2015 12:14AM ET
I have often said that betting against the US consumer is usually a bad bet. When we are happy, we spend money. When we are depressed, we spend even more to release the dopamine in our brains’ pleasure center. That helps us feel better. We were born to shop!
I have to admit that I was starting to doubt American shoppers earlier this year. Forgive me, please. Retail sales were anemic during the first four months of the year despite the windfall from lower gasoline prices. I reckoned that perhaps the savings from lower fuel costs was offset by higher out-of-pocket medical expenses attributable to Obamacare. In addition, rent inflation has been rising faster than overall CPI prices, reducing consumers’ spendable dollars for other goods and services.
Well, never mind: Retail sales jumped 1.2% during May, and the previous two months were revised higher. On Friday, we learned that personal consumption expenditures (PCE) jumped 0.9% during May, with upward revisions during April (0.1% from 0.0%) and March (0.6% from 0.5%). Real PCE rose 2.1% (saar) during Q1, and probably rose by about 3.0% during Q2.
On a year-over-year basis, real PCE rose 3.4% through May. Real disposable personal income rose 3.5%, with real wages and salaries rising 4.8%. Over the past three months through May, real consumer spending rose 2.8% (saar), led by solid gains in durable goods (9.8) and nondurable goods (2.9) but a middling increase in services (1.7).
Today's Morning Briefing: Standard of Living at Record High! (1) The last act of the Greek drama? (2) Dopamine and consumer spending. (3) Winter’s cabin fever set stage for spring spending splurge. (4) Real pay per worker at record high. (5) Real consumption per household is at record high. (6) Corporations prefer to buy back shares, pay dividends, acquire competitors, and cut expenses. (7) The logic of deals. (8) Not much inflation. (9) Why is PCED inflation lower than CPI version? (10) Yet another Chinese fire drill.
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