The State of the US Economy: Consumer Spending Cools as Inflation and Uncertainty Rise

 

 

 

 

The latest GDP figures from the Bureau of Economic Analysis show that the US economy grew by 1.1% in the first quarter of 2023. However, the growth in consumer spending that drove this growth has been slowing since January. The March data on intra-quarter changes in consumer spending shows that real consumption expenditures were flat after declining in February, with spending growth mainly in categories such as gasoline, housing, and healthcare. Spending on travel, entertainment, and dining out declined, and there was a steep decline in spending on motor vehicles and parts.

Inflation-adjusted spending in this category spiked by 16.1% in January, then fell by 1.5% in February and 1.8% in March. Furthermore, households are still buying fewer automobiles than they were prior to the pandemic. Meanwhile, the personal consumption expenditures (PCE) price index grew by 0.1% in March and was 4.2% higher than a year ago. Core inflation grew by 0.3% during the month and 4.6% over the year.

Despite modest income growth, consumers are saving more, with the savings rate rising to 5.1% in March. This suggests that households have become less comfortable with the state of the economy. However, households still hold much of the extra savings amassed from relief payments, which could help prevent a catastrophic fall in spending in a down economy.

Looking ahead, the April employment report is expected to show job growth slowing to around 200,000, with declining factory activity, slowing retail sales, and a stalled housing market suggesting that the Fed is well on its way to getting the lower inflation result it seeks.

 This is a paraphrased article written by AI gathered from this article on CoStar