When Will the Consumer Spending Surge Finally Happen?
Economists have been waiting for a surge in consumer spending fueled by savings at the gas pump and a stronger job market boosting personal incomes. They’re going to have to keep waiting.
The Commerce Department on Monday said personal spending was essentially flat in April —it fell less than 0.1 percent — even as personal income rose a better-than-expected 0.4 percent. Americans made more money in April but they didn’t spend more. Instead, they socked it away, raising the savings rate — personal savings as a percentage of disposable income — from 5.2 percent in March to 5.6 percent in April.
Related: How Obamacare Could Be Squeezing Consumer Spending
The April spending picture was the reverse of that from March, when incomes growth stalled but spending rose. Overall, though, Americans still look to be hesitant about opening up their wallets.
“This report clearly indicates that the bounce back in March did not continue into April,” Chris G. Christopher, Jr., director of consumer economics at HIS Global Insight, said in a note to clients. “It is becoming blatantly obvious that the so-called consumer gasoline price dividend is not motivating the average American household to increase their discretionary spending in any meaningful manner.”
Energy prices have risen lately, but they are still down 20 percent from where they were a year ago, notes PNC Senior Macroeconomist Gus Faucher. Eventually, that should still translate to more spending as long as the job market recovery continues apace.
“Clearly, consumption is hardly booming, but the lag between declines in gas prices and the response in the spending numbers is long, typically six or seven months,” Ian Shepherdson, chief economist at Pantheon Macroeconomcs, said in a note to clients. “Gas prices did begin to fall rapidly until November, with the biggest single drop in January, so we don't expect to see consumption accelerate properly until the summer.”
For now, the economists — and the economy — keep waiting.
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The new tax law capped the amount of state and local tax deductions Americans can claim in their federal filings at $10,000. Congressional seats for nine of the top 25 districts where residents claim those SALT deductions were held by Republicans heading into Election Day. Six of the nine flipped to the Democrats in last week’s midterms.
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Clarifying the Drop in Obamacare Premiums
We told you Thursday about the Trump administration’s announcement that average premiums for benchmark Obamacare plans will fall 1.5 percent next year, but analyst Charles Gaba says the story is a bit more complicated. According to Gaba’s calculations, average premiums for all individual health plans will rise next year by 3.1 percent.
The difference between the two figures is produced by two very different datasets. The Trump administration included only the second-lowest-cost Silver plans in 39 states in its analysis, while Gaba examined all individual plans sold in all 50 states.