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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.


Consumer Spending Mixed in November, Goods Softish, Services Better

This morning, the Commerce Department released data on monthly consumer spending in November within its general release of revised 3Q19 GDP data. Aggregate real consumer spending rose a nice 0.3% in November, with a +0.1% revision to the previously estimated October spending level. The details were mixed, with goods consumption on the softish side, but services spending looking good.

We track “core” measures of goods and services spending, which measures abstract from especially volatile components such as motor vehicles, utilities and health care. The core goods spending measure rose a bit less than 0.2% in November, and there was an equal-sized downward revision to October, leaving this measure no higher in November than was initially estimated to be the case for October. For services spending, however, this aggregate showed a 0.1% increase in November, with a +0.3% revision to October. (The stronger gains in headline consumer spending came from outsized increases in health care and vehicle purchases, the latter reflecting the end of the GM strike.)

These data are portrayed in the chart below. As you can see there, underlying goods spending looks to have slowed a bit in recent months, consistent with what the retail sales data have indicated (cf. the By the Numbers installment from 12/13). However, there has been no slowing at all in services consumption, which is a larger component of total consumption.

We could pile on by repeating that goods spending is seasonally volatile at this time of year, since it is quite difficult to precisely seasonally adjust the data when Christmas shopping patterns vary with weather, date, timing and social customs. Furthermore, personal income data for November, also released today, continue to show healthy income growth. So, there is good reason to think that the recent softness in goods spending is ephemeral, or even illusory. (Certainly, the same-store sales results posted by big retailers do NOT indicate any holiday funk among Christmas shoppers.)

Bottom line, we think the underlying consumption trends look good, and we expect them to continue thus. None of the economic data released this month have been spectacular, but none of them have evinced any real weakness either. For now at least, we are enjoying a “Goldilocks” pace of economic growth: slow enough to keep the Federal Reserve sitting on its hands, but fast enough to gainsay gathering fears of brewing recession.

Thanks for reading these posts, and all of us at Western Asset wish you a Merry Christmas, Happy Holidays and successful investing in 2020.

Consumer Spending
Real Consumer Spending by Type
Source: Bureau of Economic Analysis. As of 30 Nov 19

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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