There are lots of surveys and data on consumer spending – retail sales, personal consumption expenditures, same-store sales, etc., etc. – but Gallup has a monthly survey which asks a different question.
Each night, Gallup asks 15,000 American households to report how much they spent the previous day, excluding spending on normal household bills and major purchases such as a home or car. This daily survey gives an indication of consumer “discretionary spending.”
Household spending in the US averaged $103 a day in June, the best performance for the month of June since 2008. Household daily spending has averaged $100 or more since February. That’s the longest stretch of triple-digit spending averages Gallup has recorded in its data since 2008.
In the past, daily spending in June has generally been flat or dipped slightly, so the strong reading last month is encouraging. Spending in July is likely to hold at its current level because in most years over the past decade, Gallup has recorded figures for July that were close to June’s average.
While the average of $103 in daily spending in June is encouraging, it is interesting to note that there is a wide variance in daily household spending depending on household income. For example, daily spending among Americans living in households earning less than $90,000 annually was flat in June, at $78, similar to May’s $79 average – well below the nationwide average of $103.
Yet Americans in households earning more than $90,000 annually spent an average of $163 a day in June, statistically similar to the average of $169 they spent in May. What stands out here is that households making over $90,000 spent over twice as much daily as households making less than $90,000 on average.
The point is, consumer spending has been very strong for most of this year based on Gallup’s latest survey and others. Although Americans’ confidence in the US economy has edged down from the high points recorded after last fall’s presidential election, their spending hasn’t slowed.
With inflation having slowed, unemployment at a 16-year low and the US Department of Commerce reporting personal income up slightly this year, it is likely that spending will remain at this elevated level in the second half of the year.
The question then is, what should economic growth look like for the rest of 2017? Does it mean economic growth is poised to accelerate to 3.0-3.5% in the second half, as so many mainstream economists continue to expect?
Or does it suggest a continuation of sub-2% GDP growth? I continue to believe the latter is more likely, unfortunately. Sure, we could see GDP growth improve marginally to slightly above 2% in the second half of this year. But even if that materializes, growth will still be disappointing.
IMF Cuts US Growth Forecasts, Citing Trump Uncertainties
The International Monetary Fund (IMF) last week cut its growth forecasts for the US economy to 2.1% for both 2017 and 2018, down from its previous estimates of 2.3% for 2017 and 2.5% for 2018. The US economy grew by just 1.6% last year and only 1.4% in the 1Q of this year.
The IMF questioned whether President Trump will be successful in getting his tax cuts and fiscal spending plans through Congress and as a result, it dropped its assumption that GDP growth can reach 3% over a sustained period.
The IMF noted that the assumptions for those prior forecasts appear to have evaporated in the face of a lack of details over the Trump tax plan, the unlikelihood of getting his reforms through Congress and the $3.6 trillion in government spending cuts over 10 years — as proposed in the president’s budget plan in late May.
The takeaway here is that even the optimistic IMF has dialed back its economic growth assumptions for the US this year and next. At best, they now expect the US economy to grow by only 2.1% for this year and in 2018.
Mainstream economists, the Congressional Budget Office, the White House Office of Management & Budget and other independent groups like the IMF have overestimated US economic growth for years. They just can’t get it right.
It seems that each year we come in with a new set of rosy forecasts, only to see them whittled down over time. Yet as regular readers know, I have not bought into those forecasts and have consistently said so in these pages.