Monthly report on the consumer economic landscape from U.S. Principal Economist Michael Brown and U.S. Economist Eric Warner.
August 22, 2019 – “Consumer spending remains the key support to economic growth,” said Michael Brown, Principal U.S. Economist. “Concerns are rising over the potential for equity market volatility to adversely impact consumer confidence.” Retail sales (excluding auto sales) growth accelerated further to 3.7 percent year-over-year (YoY) in July. Department stores, non-store retailers (which include e-commerce) and food and beverage stores were among the categories with the strongest spending growth for the month. Categories of retail sales that feed into the calculation of GDP were also robust, rising 1 percent. “A solid labor market and rising future expectations among consumers should support spending,” said Eric Warner, U.S. Economist. “However, recent data shows that tariffs are starting to trickle down to consumer goods, which could drag on spending growth.”
Other highlights of this report:
June nominal personal disposable income growth remained closer to the upper bound of its post-recession average at 4.7 percent. With the release of the Q2 GDP data, wage growth over the last five years was revised sharply higher.
Real consumer spending rose a robust 4.3 percent in Q2 after a soft 1.1 percent rise in Q1. Nominal consumer spending in June rose 3.9 percent YoY, with spending on durable goods and services rising the fastest.
Increased economic expectations for the next six months sent the Consumer Confidence Index up nearly 12 points in July. However, economic expectations vary considerably by region— expectations grew throughout the Eastern U.S. and the Midwest, but declined in Western states.
The U.S. economy added 164,000 jobs in July, again posting broad-based gains. Unemployment remained stable at 3.7 percent and average hourly earnings rose slightly to 3.2 percent YoY. Continued strength in the labor market should support retail spending growth at the start of the third quarter.
Sources: Visa Business and Economic Insights and U.S. Department of Commerce
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