The Bureau of Economic Analysis (BEA) provided their first revision to fourth quarter 2015 Gross Domestic Product (GDP) growth. The net result is that annualized fourth quarter GDP growth was revised up from the original estimate of .7% to 1.0%. There will be one more revision before we learn the final numbers for the fourth quarter.
So, what were the sub-components of the 1.00% growth?
|Category||Percent Contribution to Total GDP|
|Personal Consumption Expenditures||1.38%|
|Gross Private Investment Spending||(.12%)|
As discussed in a previous blog, consumer spending is providing stability to help offset weakness in the other sectors of the economy. Today’s post delves a little deeper into consumer spending to help provide insight into what consumers are buying.
For those who do not want to go through the full details of what consumers were buying here is the “Cliff Notes” version.
From a total spending perspective:
Examining the change from the previous quarter shows that consumers were apparently focused on staying healthy and enjoying themselves:
Perhaps the consumer decided to increase their spending on recreational items because of savings being realized in energy related expenses.
Consumers will remain the key for 2016 economic growth. So far, the volatility in the financial markets has not dramatically changed the confidence level of consumers. Steady confidence and the potential for better wage gains in 2016 would be the recipe for steady consumer spending in 2016. What we will need to monitor is whether some type of economic or geopolitical event rocks the consumers’ confidence and causes them to cut back on spending due to heightened fears and uncertainty.
Now, for those who like the details, here is a table giving a breakdown of the major consumer spending categories. All categories have not been listed so the subcategories will not equal Total Consumer Spending.
Increase/Decrease from 3rd Quarter
|Percent of GDP Growth|
|Total GDP||$18.15 trillion||$41.2 billion|
|Total Consumer Spending||$12.43 trillion||$57 billion||68.5%|
|· Motor Vehicles and parts||$455 billion||($6.9 billion)||2.5%|
|· Furnishings and household equipment||$302.5 billion||$4.3 billion||1.7%|
|· Recreational goods and vehicles||$383.8 billion||$16.7 billion||2.1%|
|· Other durable goods||$205.1 billion||$3.6 billion||1.1%|
|· Food and beverages purchased for off-premises consumption||
|· Clothing and footwear||$376.3 billion||($200 million)||2.1%|
|· Gasoline and other energy products||$294.7 billion||($2.0 billion)||1.6%|
|· Other nondurable goods||$1.1 trillion||$10.3 billion||6.1%|
|· Housing and utilities||$2.2 trillion||($7.2 billion)||12.3%|
|· Health care||$2.1 trillion||$16.8 billion||11.6%|
|· Transportation||$379.6 billion||$1.8 billion||2.1%|
|· Recreation||$479.3 billion||$5.3 billion||2.6%|
|· Food services and accommodations||$827.1 billion||$7.6 billion||4.6%|
|· Financial services and insurance||$931.0 billion||$3.3 billion||5.1%|
|· Other services||$1.1 trillion||$5.6 billion||6.2%|
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.