Photo: LittleMissSilly, Flickr
Consumer spending has been pretty uninspired so far this year, contributing to GDP growth below expectations.In a note, Goldman’s Jan Hatzius argues that the consumer will re-accelerate in the back half.
We summarize his three reasons:
- Gasoline prices have fallen sharply, by about $.50/gallon. This will help the consumer. Says Hatzius: “We estimate that the gasoline shock has pushed the level of real consumption about 0.3% below the baseline”
- House prices are stabilizing. Says Hatzius: “…Four alternative indicators of US house prices: the seasonally adjusted Case-Shiller index; the CoreLogic index with a seasonal adjustment provided by Haver Analytics; the seasonally adjusted FHFA index; and the median price of existing homes with a seasonal adjustment estimated by ourselves. All four indicators showed a substantial drop between mid-2010 and February/March 2011. Since then, however, all four indicators have looked somewhat better, with smaller seasonally adjusted declines in the Case-Shiller and CoreLogic series and small seasonally adjusted increases in the FHFA and median price series.”
- Household balance sheets are “healing.” Delinquencies are decreasing. Debt service burden has fallen. Credit standards are loosening.