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Consumer Spending Rebounds in April

Consumer spending revived in April after slumping in March, the US Census Bureau reports.

 


By James Picerno

Today’s update offers new support for arguing that economic growth will strengthen in the second quarter after virtually grinding to a halt in Q1, based on GDP data.

Retail (NYSEARCA:XLY)spending jumped 1.3% last month, delivering a healthy contrast to March’s 0.3% slide. More importantly, the year-over-year rate picked up for headline spending. Consumption increased 3.0% for the 12 months through April—a healthy rebound after March’s weak 1.7% year-over-year advance.

retail.13may2016

“This is all part and parcel of the consumption numbers coming more in line with the income numbers we’ve been seeing,” advises Jacob Oubina, senior US economist at RBC Capital Markets in New York. “The breadth of this report was extremely constructive.”

That’s a reasonable view, but note that the growth trend still appears to be slowing, as the annual pace in the chart above reminds. Even so, it’s harder to argue that consumer spending is falling off a cliff in the wake of today’s release. In turn, the day’s retail numbers boost the case for expecting modestly firmer Q2 growth for the US economy overall.

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The macro trend is still relatively sluggish compared with last year. But as the April data continues to roll in, the early clues suggest that the bias for modest growth is intact as of last month. The next opportunity to revise the outlook for good or ill, arrives in Tuesday’s (May 17) updates on housing starts and industrial production(NYSEARCA:XLI) for April.