Consumer spending is the engine that powers any economy. It is estimated that something like 70% of US output is consumed in the domestic market, so consumer sentiment and spending is critical to the fortunes of the economy.
The USA is emerging from the third worst winter on record, a winter that saw extreme cold and exceptional snowfall, causing significant disruption in December and through to mid-February. The bad weather was blamed for a downturn in consumer spending since the conditions deterred people from shopping trips.
US Department of Commerce figures for consumer spending in February have just been released. The data shows that a two-month decline in consumer spending has been reversed with a 0.3% increase over the January figure. The performance beat analysts’ predictions which had called for a 0.2% hike. Consumer spending has been uneven, but has increased by 1.5% over the past 12 months.
Perversely, the cold weather has given a boost to the sales of building materials and garden equipment – in the shape of snow shovels and other equipment to deal with the wintry conditions. Of course, bad weather usually curtails construction work. The sector gained 1.4% in January.
The outlook for consumer spending is said to be more positive since the worst of the winter weather is surely behind us and there has been an increase in disposable income for the first time since 2009. This stems in part from buoyant share prices, a slight pick-up in wages and a drop in inflation.