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:

Clarifying the Drop in Obamacare Premiums

An insurance store advertises Obamacare in San Ysidro, California
© Mike Blake / Reuters
By The Fiscal Times Staff

We told you Thursday about the Trump administration’s announcement that average premiums for benchmark Obamacare plans will fall 1.5 percent next year, but analyst Charles Gaba says the story is a bit more complicated. According to Gaba’s calculations, average premiums for all individual health plans will rise next year by 3.1 percent.

The difference between the two figures is produced by two very different datasets. The Trump administration included only the second-lowest-cost Silver plans in 39 states in its analysis, while Gaba examined all individual plans sold in all 50 states.

Number of the Day: $132,900

istockphoto
By The Fiscal Times Staff

The cap on Social Security payroll taxes will rise to $132,900 next year, an increase of 3.5 percent. (Earnings up to that level are subject to the Social Security tax.) The increase will affect about 11.6 million workers, Politico reports. Beneficiaries are also getting a boost, with a 2.8 percent cost-of-living increase coming in 2019.

Photo of the Day: Kanye West at the White House

President Trump speaks during a meeting with rapper Kanye West in the Oval Office at the White House in Washington
KEVIN LAMARQUE/Reuters
By Yuval Rosenberg

This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”

Trump called Kanye’s monologue “pretty impressive.”

“That was bonkers,” MSNBC’s Ali Velshi said afterward.

Again, this is 2018.

Chart of the Day: GDP Growth Before and After the Tax Bill

Paul Ryan with tax return postcard
By The Fiscal Times Staff

President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.