As I was at the airport yesterday to write my last post on US consumption (here), I wasn’t able to add charts. This post is just an addendum with three graphs on consumers’ behavior.
As I mentioned here, it is important to highlight this behavior as the GDP downward revision came mainly from households’ consumption (see here my post on GDP revision)
The first chart shows the quarterly change of consumption expenditures. For the second quarter, this year, this is carry over growth at the end of May.
Since the beginning of this year, a new regime in consumption expenditures can be seen. Consumption growth was above 1.5% in 2012 and 2013, it is now close to 1%.
On a monthly basis the picture is also complicated as changes in April and May expenditures were negative.
For the last 6 months, volatility of consumption change has increased. The number was negative in January but this could be related to climate hazard, but in was not the case in December. If the explanation is the climate, then the rebound in February and March can be understood. But then the question is on April and May with two successive drops?
This is not a negative mood from households. In the June Conference Board survey, households were optimistic on their income for the 6 months to come (see chart). It shouldn’t be associated with lower figures on expenditures.
The current consumption momentum is a puzzle as income is increasing and income’s expectations are positive. I will develop a larger framework this week-end to try to understand better what is happening.
If the momentum remains low this will be a problem for the US business cycle but also for emerging countries and for the Euro Area. For this latter, part of the higher expected economic momentum relies on an impulse from the US.