When Will the Consumer Spending Surge Finally Happen?

When Will the Consumer Spending Surge Finally Happen?

iStockphoto
By Yuval Rosenberg

Economists have been waiting for a surge in consumer spending fueled by savings at the gas pump and a stronger job market boosting personal incomes. They’re going to have to keep waiting.

The Commerce Department on Monday said personal spending was essentially flat in April —it fell less than 0.1 percent — even as personal income rose a better-than-expected 0.4 percent. Americans made more money in April but they didn’t spend more. Instead, they socked it away, raising the savings rate — personal savings as a percentage of disposable income — from 5.2 percent in March to 5.6 percent in April.

Related: How Obamacare Could Be Squeezing Consumer Spending​​ 

The April spending picture was the reverse of that from March, when incomes growth stalled but spending rose. Overall, though, Americans still look to be hesitant about opening up their wallets.

“This report clearly indicates that the bounce back in March did not continue into April,” Chris G. Christopher, Jr., director of consumer economics at HIS Global Insight, said in a note to clients. “It is becoming blatantly obvious that the so-called consumer gasoline price dividend is not motivating the average American household to increase their discretionary spending in any meaningful manner.”

Energy prices have risen lately, but they are still down 20 percent from where they were a year ago, notes PNC Senior Macroeconomist Gus Faucher. Eventually, that should still translate to more spending as long as the job market recovery continues apace.

“Clearly, consumption is hardly booming, but the lag between declines in gas prices and the response in the spending numbers is long, typically six or seven months,” Ian Shepherdson, chief economist at Pantheon Macroeconomcs, said in a note to clients. “Gas prices did begin to fall rapidly until November, with the biggest single drop in January, so we don't expect to see consumption accelerate properly until the summer.”

For now, the economists — and the economy — keep waiting.

Top Reads from The Fiscal Times:

Special Tax Break Zones Defined for All 50 States

Workers guide steel beams into place at a construction site in San Francisco, California September 1, 2011.  REUTERS/Robert Galbraith
© Robert Galbraith / Reuters
By Michael Rainey

The U.S. Treasury has approved the final group of opportunity zones, which offer tax incentives for investments made in low-income areas. The zones were created by the tax law signed in December.

Bill Lucia of Route Fifty has some details: “Treasury says that nearly 35 million people live in the designated zones and that census tracts in the zones have an average poverty rate of about 32 percent based on figures from 2011 to 2015, compared to a rate of 17 percent for the average U.S. census tract.”

Click here to explore the dynamic map of the zones on the U.S. Treasury website. 

Map of the Day: Affordable Care Act Premiums Since 2014

FILE PHOTO: A sign on an insurance store advertises Obamacare in San Ysidro
MIKE BLAKE
By The Fiscal Times Staff

Axios breaks down how monthly premiums on benchmark Affordable Care Act policies have risen state by state since 2014. The average increase: $481.

Obamacare Repeal Would Lead to 17.1 Million More Uninsured in 2019: Study

A small group of demonstrators stand outside of of a hotel before former South Carolina Senator Jim DeMint, president of the The Heritage Foundation, speaks at a "Defund Obamacare Tour" rally in Indianapolis, Indiana, U.S.  August 26, 2013.  REUTERS/Nate
© Nathan Chute / Reuters
By The Fiscal Times Staff

A new analysis by the Urban Institute finds that if the Affordable Care Act were eliminated entirely, the number of uninsured would rise by 17.1 million — or 50 percent — in 2019. The study also found that federal spending would be reduced by almost $147 billion next year if the ACA were fully repealed.

Your Tax Dollars at Work

White House Office of Management and Budget Director Mick Mulvaney speaks about the budget at the White House in Washington
REUTERS/Kevin Lamarque
By Michael Rainey

Mick Mulvaney has been running the Consumer Financial Protection Bureau since last November, and by all accounts the South Carolina conservative is none too happy with the agency charged with protecting citizens from fraud in the financial industry. The Hill recently wrote up “five ways Mulvaney is cracking down on his own agency,” and they include dropping cases against payday lenders, dismissing three advisory boards and an effort to rebrand the operation as the Bureau of Consumer Financial Protection — a move critics say is intended to deemphasize the consumer part of the agency’s mission.

Mulvaney recently scored a small victory on the last point, changing the sign in the agency’s building to the new initials. “The Consumer Financial Protection Bureau does not exist,” Mulvaney told Congress in April, and now he’s proven the point, at least when it comes to the sign in his lobby (h/t to Vox and thanks to Alan Zibel of Public Citizen for the photo, via Twitter).