A Gallup Poll headline says “U.S. Self-Reported Spending Flat Since May”
However, the charts show stagnation since March. Let’s take a look.
U.S. self-reported daily consumer spending was $89 in July, unchanged from the $90 of June and May. The relatively flat spending levels of the past five months are consistent with the weak GDP reports of the past three quarters and the lack of improvement Gallup finds in its Payroll to Population employment rate over the past couple of years.
Trend in Self-Reported Spending
Spending began the year at $80 in January and $83 in February. Consumers opened their wallets some more in March, spending an average of $89, reflecting the normally expected seasonal spring increase in sales.
However, consumer spending has remained basically at that level since — in the face of what are normally positive seasonal factors such as warmer weather, home improvement projects, and spring and summer travel. Longer-term, Americans’ self-reported spending is much stronger than it was from late 2008 to late 2011, but continues to trail early 2008, before the recession gained momentum.
Spending Across Income Levels Also Relatively Flat
Upper-income spending inched up to $158 in July, from $143 in June and $150 in May. But the upper-income spending data tend to be more volatile due to the smaller sample sizes involved, and the overall trend seems to be essentially flat over the past five months — with a peak of $166 in March and a low of $140 in April.
Lower- and middle-income spending averaged $78 per day in July, similar to the $77 per day in June and May, and the $75 in March. Spending by this group in 2013 has been in a relatively narrow range, from a high of $78 last month to a low of $70 in January.
The survey question was “Not counting the purchase of a home or vehicle or your normal household bills, how much money did you spend or charge yesterday on all other types of purchases you may have made such as at a store, restaurant, online, or elsewhere?”
In simple terms, Gallup was checking up on self-reported consumer discretionary spending.
Even as Wall Street is reaching new record highs, questions remain about the strength of the Main Street economy. Gallup’s self-reported spending results for July suggest the underlying economy remains fragile at best. This aligns with recent weak GDP reports, the lack of increase in full-time jobs with employers, the slight decline in economic confidence, and Friday’s mixed, but also relatively weak, Bureau of Labor Statistics jobs report.
The reason spending hasn’t in fact declined over the past several months may be that the Federal Reserve’s efforts to flood the economy with money have not only been supportive of Wall Street, but also bolstered durable goods values in general, including housing and autos.
Still, at this point, Gallup’s economic data do not support the idea of a significantly improving U.S. economy in the second half of the year. In turn, this suggests retailers may be disappointed with the Back-to-School spending season.
I agree with the above conclusions, written by Dennis Jacobe, Chief Economist for Gallup.
Mike “Mish” Shedlock