Consumer spending rose last month. Will it hold through the summer?
Everyone seems to be banking on U.S. consumers opening their wallets and continuing to power the economic recovery, and we got some new numbers on that today.
The Bureau of Economic Analysis reported that consumer spending notched up a half percent last month. It looks like consumers will splurge over the summer. And after that? Were this a Friday in October, what might we be saying about consumer spending?
Peter Kotrodimos knows exactly what he’ll be doing this October: spending, he says, on fun stuff. “I know we’ll be traveling and I know we’ll be seeing at least a concert,” he said. This fall, Kotrodimos and his family will travel from their home near Phoenix, Arizona to Mexico.
“You know –– all this pent-up demand that you‘ve been hearing about –– I’m saying that we’re revving up,” he said. Kotrodimos has more than a passing interest here; he’s an economics professor at Central Arizona College.
Lydia Boussour, an economist at Oxford Economics, says she will be spending this summer –– she’s taking a trip to Spain. As for the fall, she says: “We’re likely to see a cool down in consumer spending, as consumers and the economy put the pandemic behind. We’re likely to see some normalization.”
Boussour still predicts consumer spending will increase almost 10% this year, the strongest increase since 1946, and she expects consumption to grow by 5% next year.
Economist Wendy Edelberg at the Brookings Institution is also anticipating strong spending for the rest of the year. But she sees risks. If this were October, Edelberg said she’d tell me to watch for signs of strain from all that consumer demand.
“Whether or not we’re seeing stresses in the labor market, [whether or not we’re seeing stresses] in production, in inventories and what’s going with imports, what’s going on with inflation. There will be a lot of signs flashing yellow, perhaps even red,” she said.
Edelberg is planning some business travel this fall, with the caveat that if there’s a COVID-19 resurgence, she’ll be back on Zoom.