How Much Consumption Growth Is There?

Retail sales data for April was less than spectacular. The three month rolling average marginally slowed, and non-seasonally adjusted (but inflation adjusted) growth was under 2% [analysis here].

For most, retail sales are ignored - the primary economic gauge is personal consumption expenditures (PCE) as it is around 70% of GDP. But to this analyst, personal consumption expenditures includes spending elements that I do not consider to be representative of economic heath such as:

  • health care costs including Medicare
  • theoretical or actual rent for your home (even if you own it outright)

Both retail sales and PCE include imports which are eventually deducted from GDP, and neither retail sales or PCE include exports.

As an analyst, I want to drill down to the level of the consumer - and use that metric as a measure of the economic health. After all, what is important in any economy is the economic health of the citizens.

Except in periods around recessions, there is good correlation in the rate of growth of retail sales and PCE. In reality it may not make much difference whether the rate of growth of the consumer is analyzed using retail sales or PCE. The CPI-U less shelter (inflation) is 1.9% year-over-year - and population growth 0.7% YoY - which puts per capita inflation adjusted retail sales growth at 1.2 % for April 2018 - far from excellent growth.

It needs to be pointed out that even retail sales is not an exact tool for understanding consumer spending. There is no median consumption information available for one to view the health of Jane and Joe Sixpack - and as always, we must assume consumer spending is fueled by the expenditures of the upper quartile.

Then it is not much of a stretch to believe there may not be much real spending growth for Jane and Joe Sixpack.

Other Economic News this Week:

The Econintersect Economic Index for May 2018 again improved and remains in territory associated with economic growth which is normally associated with expansions. There are continuing warning signs of consumer over-consumption.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Economy

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