Economy Watch: U.S. Consumers Went Shopping in July
- Aug 30, 2011
In July, U.S. consumers dipped into their savings to do what U.S. consumers are famous for, buying things. The fear of a double-dip recession or default by the federal government or even fear itself didn’t stop Americans’ spending from rising 0.8 percent during the month, according to the U.S. Department of Commerce on Monday. That’s a 0.5 percent when factoring in inflation, which also saw an uptick during July.
The nominal increase in consumer spending was the largest month-over-month increase since very early in 2011, before the earthquake in Japan and the civil war in Libya panicked an easily panicked economy. By contrast, the inflation-adjusted increase was the largest since early 2010, before the first Greek debt crisis panicked an easily panicked economy. Sales in July were led by durable goods, up 2 percent for the month, as consumers especially bought more Japanese cars and parts, which are fully back on the market now.
Since Americans aren’t being paid any more for their labor than they have been in recent years—in fact, when adjusted for inflation, disposal income was down 0.1 percent month-over-month in July—that spending had to come from somewhere else. The annualized rate of savings in the United States thus dropped to $582.8 billion in July from $638.6 billion in June, according to Commerce.
But not shopping for houses
One item Americans still aren’t rushing to buy is houses. The National Association of Realtors reported on Monday that its pending home sales index was down to 89.7 in July, a drop of 1.3 percentage points compared with June. The drop came on the heels of two monthly upticks in the index.
Compared with the same month a year ago, pending sales are 14.4 percentage points higher. Last summer was the pit of the post-homebuyer credit credit expiration hangover, however, distorting the results (and why couldn’t that tax credit have been phased out?). Pending sales, in the NAR’s estimation, specifically means contracts inked but sales not yet closed.
The always-optimistic chief economist for the Realtors, Lawrence Yun, asserted in a statement that “the underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”
Wall Street seems relieved
After listening to the hyped cable TV forecast fears for Hurricane Irene last week, Wall Street probably expected to be (literally) under water on Monday. While the damage from the storm was real enough from the Carolinas to New England—in the billions of dollars, with lives lost—it didn’t seem bad enough to inspire a selling panic among investors.
In fact, investors felt chipper enough to buy. The Dow Jones Industrial ended Monday up 254.71 points, or 2.26 percent. The S&P 500 likewise saw a strong upward movement of 2.83 percent, and the Nasdaq advanced by 3.32 percent.