Positive Signs for US Consumer Consumption

24 December 2002

New US figures suggest consumer spending – which has kept the economy afloat this year – remains relatively strong going into 2003.

Latest results from the University of Michigan’s confidence barometer show an improvement in consumer sentiment in the last month. The index climbed from November's 84.2 to 86.7 in December, fuelled by rises in both the expectations (from 78.5 to 80.8) and current conditions (from 93.1 to 96.0) components.

Moreover, new Commerce Department figures show that November saw the fastest rise in household spending for four months. Personal consumption (adjusted for inflation) rose 0.5% last month, accelerating from 0.2% growth in October.

Expenditure on durable goods (those designed to last more than three years) was also up in November, climbing 1.9% to bounce back from a 1.3% decline the month before.

Healthy consumer spending has been essential for economic growth this year. Separate Commerce Department figures show that the US economy grew 4% year-on-year in the third quarter, during which Americans raised expenditure by 4.2% but businesses cut investment by 0.8%.

These revised results for third-quarter growth, better than previous estimates [WAMN: 01-Nov-02], are well up on Q2’s 1.3% expansion in GDP, but not as good as the first quarter’s 5%. Economists fear growth may slow to 2% or below in the current quarter.

Data sourced from: Wall Street Journal Online; additional content by WARC staff