Gluskin Sheff’s veteran economist David Rosenberg is out with a new note debunking what he calls the “biggest myth around,” the idea that the U.S. consumer has not been contributing to the economy.
“Far from it — the contribution the consumer is making in terms of a long-term commitment to the economy is rather impressive, in view of all the fiscal headwinds and what has been a challenging jobs market,” Rosenberg wrote to clients.
Real consumer expenditures on big ticket durable goods rose a hefty 0.8% in August on top of a 0.4% gain in July and a 1% bounce in June. Perhaps it would be too cheerleading to report that such outlays have risen for seven months in a row.
The three-month trend is running at a not-too-shabby 9.3% annual rate and the YoY trend is running north of 8%. What is holding back much of the spending has been services, many of which are imputed by the government. The burst of durable goods spending has transcended the booming automotive sector. I say “booming” fully recognising that motor vehicle sales dropped in September to a 15.24 million unit annual rate from 16.02 million in August — the lowest reading since April but the reality is that calendar distortions were at least partly at play — 23 selling days versus 28 in August and 25 in September of last year (and sales volumes are up more than 4% from then).
But as the government shutdown drags on, consumers may face even stronger “fiscal headwinds.”