Consumer Spending Continues to Grow at 2.2%

According to the Bureau of Economic Analysis, real consumer spending in January 2014 was $10,853 billion real dollars (seasonally adjusted at an annual rate). As is the case almost every month, real consumer spending hit a new all-time high in January. Spending in January 2014 was 2.2% more than it was in January 2013. Real consumer spending has grown at this rate in three of the last four months. And, this is the fastest rate of month-over-month growth since September 2012.

This is the eighth time in nine months that the annual rate of change has been 2.0%. However, the historical average annual rate of growth is 3.3%. So, spending growth is still running quite a bit below normal. In the next couple of months, the annual rate of change in spending may move a few ticks higher. But, with annual growth in incomes relatively flat, it is likely that real consumer spending will remain at a constant rate of growth in 2014.

Real consumer spending (or its sub-components such as medical care spending) is an important leading for a number of durable goods end markets: construction materials; custom processors; food and beverage processing; forming and fabricating (non-auto); hardware; HVAC; industrial motors, hydraulics and mechanical components; machinery and equipment manufacturing; medical; metalcutting job shops; oil, gas field and mining machinery; power generation; primary metals; and printing. Most of these subcategories of spending were revised lower in November and December. And, they almost all saw slower growth in January. The one exception was real medicare spending, which grew at its fastest monthly rate since March 2005. It's good to see Obamacare is helping to reduce the nations health care costs in its first official month. This significant increase in medical care spending likely took away from other types of spending.