Here is a bit of good news
about consumer spending that will probably not make the local news. It was at the end of a lengthy (and mostly
negative) update from Bank of America’s economists.
Aided by the boost to real
disposable personal income provided by falling energy prices,
inflation-adjusted consumer spending rebounded 0.6% in November, its first
monthly gain since May. Durable and service spending rose 0.6% and 0.1%,
respectively in November, while nondurable consumption jumped 1.5%, following 5
consecutive monthly declines. The break in the downward trend in real spending
implies a softer Q4 consumption decline than previously estimated, a bit of
solace in a quarter of rapidly falling economic activity. We estimate that consumer
spending fell 1.8% annualized pace last quarter versus a 3.8% rate of decline
in 3Q 2008. Following a roughly 3% pace of decline in the second half of
last year, we forecast
about a 1% pace of decline in the first half of 2009. The pace of
decline should diminish as household spending falls into line with new lower
levels of household net worth. However, job cuts and tight credit will continue
to constrain spending in 2009. Moreover, high levels of consumer debt point to
a prolonged period of below-trend consumption, lasting into 2010.
On another positive economic
note (although less scientific), I spoke with a sewing machine retailer today
who told me that earlier this week a couple came to her store to look at sewing
machines. Before they left, they spent
$20,000 on a number of top-of-the line products after being given extensive
demonstrations showing the value of each.
While such a sale is going to be a rare occurrence, I wonder how much
sales would increase if we assumed that every customer walking in the door could
purchase that much rather than assuming everyone is cutting back.
Good selling!
Bill Hinderer
