Consumers Continue to be the Engine of Growth for the U.S. Economy

Consumers Continue to be the Engine of Growth for the U.S. Economy

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%)
Net Exports (.34%)
Government Spending (.01%)
Total GDP 1.00%

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:

  • Consumer spending accounted for 68.5% of total GDP growth.
    • Consumer spending on durable goods accounted for 22.1% of total GDP;
    • Consumer spending on services accounted for 46.4% of total GDP;
  • Housing and utilities expense is the biggest spending category for consumers.
    • 12.3% of total GDP
  • Health care is a close second.
    • 11.6% of total GDP

Examining the change from the previous quarter shows that consumers were apparently focused on staying healthy and enjoying themselves:

  • Health care spending saw the biggest increase in spending from consumers as it rose $16.8 billion in the 4th quarter;
  • Recreational goods and vehicles rose $16.7 billion in the 4th quarter.

Perhaps the consumer decided to increase their spending on recreational items because of savings being realized in energy related expenses.

  • Gasoline and other energy product expenses declined by $2 billion in the quarter
  • Housing & utilities expenses dropped by $7.2 billion for the quarter. Although a specific breakdown was not provided, this was probably related to lower utility 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.






Amount Spent


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  

$899.5 billion


($1.0 billion)



·         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%

About The Author

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.