Consumer Spending is Bonkers

What is happening with consumer spending?

The first quarter of 2003 was unique. Not only did the U.S. go to war with Iraq, but the country’s consumers focused their spending on nondurable goods in an unprecedented fashion.

Real growth in nondurable spending exceeded both durables and services by the largest margin ever. This suggests that when consumers have the cash and do not need any more SUVs and are scared to fly, they will still spend, even if it just means dining out more.

While this pattern of spending has changed in recent months, the last few quarters illustrate just how unusual consumer spending has been through the recent recession and slow recovery.

Spending on services, on the other hand, has been fairly weak across the board, which is consistent with its performance in past recessions. The only consistent source of strong growth has been medical services and even that has been slowing as of late. Transportation services have experienced fairly consistent spending declines as consumers hesitated to travel due to security fears. Growth of real spending on housing services has mostly remained under 2%.

Source: Economy.com (If you subscribe.)