Economists often say, “It all depends on the consumer.” Sometimes we’re reminded, more specifically, “Their spending accounts for about two-thirds of all U.S. economic activity.”
How often do we hear that? Not much pressure there, right? We’re all consumers at any given moment, but economy watchers can be forgiven for wondering how aware the American public generally is about how much and how often it is expected to save the day.
We’re hearing the clarion call again as 2016 gets off to a sluggish start and we’re reminded, because the data lag, that the economy grew just 0.7 percent in the fourth quarter, down from 2 percent the previous quarter and 3.9 percent in the spring quarter last year.
On Monday the Commerce Department said consumer spending fell by $700,000 in December. That’s less than 1 percent, but the drop came during the prime gift-giving holiday season. The decline also occurred even as personal income rose 0.3 percent, or $42.5 billion. It had risen 0.5 percent the previous month.
"In November, consumers came out swinging — they saved less and spent more," Chris G. Christopher Jr., director of consumer economics at IHS Global Insight, told the Los Angeles Times. "In December, consumers took a breather and consumer spending was flat."
Nonetheless, Christopher told the newspaper that he believes spending will rise again in the first quarter.
Gasoline prices continue to drop, but a Reuters/Ipsos poll out Monday suggests that consumers are saving more and not spending their additional disposable income. As a result, Reuters suggests that low oil prices won’t do as much for the economy in the near future as they traditionally have.
"We don't seem to be getting the benefits from cheaper gasoline that we did when the economy was healthier," veteran oil economist and independent consultant Phil Verleger told Reuters.
Auto sales were strong last year, though, rising 5.7 percent, to 17.5 million. CNN reports that Americans bought a record number of new vehicles in 2015, crediting pent-up demand as one of four main factors.
Today we will get the January auto sales report. Zacks says most analysts expect sales to get even better this year as income and employment rise and gasoline prices — there they are again — stay low.
Beyond vehicle sales, there are fewer bigger-ticket purchases than a home, and sales of new single-family homes climbed sharply in December, rising 11.6 percent to a seasonally adjusted annual rate of 481,000 units, the Commerce Department said last week.
As the reports on auto and new-home sales continue to trend upward, they belie recent concerns that the economy might be starting to slide toward a recession.
What we need is another encouraging jobs report, and it appears that the federal Department of Labor will oblige when it releases its January data on Friday.
Business Insider said Monday that forecasts are for an increase of 190,000 jobs — not as strong a number as December’s 280,000, but an indicator of continuing expansion. The unemployment rate is expected to stay at 5 percent.
The best indicator of a healthy economy remains job growth. And a couple hundred thousand newly empowered consumers would certainly take some pressure off the rest of us.