skip navigation

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.


For Consumers, Feeling Good Doesn't Mean Spending Good

In my assessments of the economy, I completely ignore sentiment indices, especially the data on consumer confidence. I’ve never had reason to regret this “ignoring,” and the recent experience on consumer spending only strengthens my convictions.

For months, the consumer confidence data have been buoyant, causing many to think that consumption was set to accelerate. We even got a taste of strength when November retail sales rose firmly. However, those strong gains were followed by weak growth over the subsequent three months. Today’s data on consumer spending through February show so-so growth for consumption of services as well as of goods.

Headline real consumption was essentially unchanged in February (up 0.01%), with a very slight (0.03%) upward revision to the January decline. Both headline goods and services consumption were essentially flat. When one extracts “eccentric” components, such as motor vehicles, utilities and health care, goods consumption remained flat, but services consumption showed a decent 0.3% gain. These “underlying” spending measures are plotted in the accompanying chart.

You may be thinking: “Well, he’s taken out vehicles, utilities and health care, how are those performing?” The answer is: not great. Both vehicles and utilities consumption have declined over recent months. Health care spending is rising, but at a slower rate recently than what we saw in mid-2017.

Apart from these, underlying consumption is back on pre-Xmas trends. We’re not talking actual weakness. There just isn’t any sign of acceleration to support the contention that the economy has improved in recent months.

Personal income did show nice growth in February, in line with the better February jobs data. If job growth continues in the 250,000-plus range, this faster income growth would continue and so would faster consumption. As of now, however, this outcome looks like a tall order.

Real Consumer Spending by Type
Real Consumer Spending by Type
Source: Bureau of Economic Analysis. As of 28 Feb 18

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 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.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2022. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.