U.S. Consumer Spending Flat in April

By DENNIS JACOBE, Chief Economist, Gallup— U.S. self-reported daily consumer spending was $86 in April, not much different than the $89 in March or February’s $83.

This lack of change in consumer spending since February could reflect a number of issues, including the end of the payroll tax holiday.

These results are based on Gallup Daily tracking interviews, conducted by landline and cellphone, with more than 15,000 Americans from April 1-30.

Gallup’s consumer spending measure is essentially a discretionary spending measure and is generally more closely related to chain-store sales and online sales than overall retail sales.

This year’s early Easter may have had some effect on April versus March consumer spending comparisons.

Regardless, consumer spending that would normally increase in March and April before seasonal adjustment has been flat since February.

Longer-term, Americans’ self-reported consumer spending is much stronger than it was from late 2008 to late 2011. Spending has been inching up in general since then.

Upper-Income Consumer Spending Declines

Upper-income spending fell to $140 in April from $166 in March, and is essentially the same as the $144 average in February.

Lower- and middle-income spending averaged $72 per day in April, not much different than the $75 per day in March and identical to the February reading.

Lower- and middle-income weekly spending has been relatively flat over the past two months.

Although weekly upper-income spending tends to be more volatile due to smaller sample sizes — and increased sharply to an average $204 for the week ending April 21 — the data suggest an overall downward trend in upper-income spending over the past two months.

Implications For Consumer Spending

Gallup’s self-reported consumer spending measure suggests an absence of the usual seasonal spending increases seen in March and April.

This is consistent with the slow sales many retailers reported and the overall slowing of the economy in recent months.

It may also reflect the delayed impact on consumer spending of the elimination of the payroll tax holiday. It is also possible that the weak March jobs report is playing a role.

While one might expect falling gas prices at the pump to provide consumers with the ability to spend in other areas, this does not appear to be the case as of yet.

Gallup does find that increased consumer optimism about housing prices has a “wealth effect”: that is, as Americans see that the value of their home has increased, they feel their personal balance sheet or wealth has also increased, leaving them in a stronger financial position – having higher net worth – and thereby making them more comfortable spending.

In turn, financially comfortable consumers may have a positive impact on consumer spending over time.

Consumer spending remains key to the growth of the U.S. economy, particularly upper-income discretionary spending. While economic confidence has been on the rise, such an increase in confidence may be a necessary, though perhaps not sufficient, condition for increased spending.

Real improvement in the economy is more likely to be based on a real improvement in the job market.

Source: Gallup Economy

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