Consumer Durable Goods Spending Up 10.1% in March
While income continues to remain stagnant, spending on consumer durable goods grew at its fastest pace since July 2005 in March. Compared to March 2009, spending on consumer durable goods grew by 10.1% this March. Spending on durable goods in March was about $40 billion more than it was in February. The increase was mostly due to new car sales and the purchase of appliances and electronics for home sales (slightly improved because of the government’s first time home buyer program). Also, the $40 billion increase in consumer durable goods spending was virtually the entire increase in total consumer spending in March. Consumer durable goods spending is a good leading indicator for consumer durable goods industrial production. The current trend in consumer durable goods spending indicates that industrial production should continue to grow in the short term – good news for the metalworking industry. However, the improvement in spending and industrial production could be short lived. Half of the $40 billion increase in spending was a direct result of a $20 billion increase in government transfer payments (welfare, Social Security, unemployment benefits, etc.) in March. The remaining increase was due to a fall in the savings rate. To see the relationship between income, spending, and industrial production go here.