It looks like Americans might be willing to spend a bit more of the money rattling around in their pockets.
The Commerce Department on Thursday reported that gross domestic product grew at 2.3% annual rate in the second quarter, which was less than economists expected. But it also came with an offsetting upward revision to first-quarter GDP, now reckoned to have grown 0.6% instead of contracting 0.2%. What's more, second-quarter GDP would have been stronger if it hadn't been for companies drawing down inventories and a decline in investment spending. The latter is unlikely to get repeated in the current quarter.
One way to cut through the noise on the GDP report is to look at consumer spending. This bounces around less than categories like inventories and also says more about where the economy is headed.
The good news here is that real, or inflation-adjusted, personal consumption expenditures grew at a 2.9% annual rate in the second quarter, up from 1.8% in the first. That pickup was driven by a change in the personal saving rate, which slipped to 4.8% from 5.2%.
Though the evidence is still tentative, it may be that increasing confidence in the job market is making consumers more willing to spend the money they have been spending on gasoline. Indeed, a June survey from the Federal Reserve Bank of New York showed people put the odds of losing their job over the next year at 14% versus 15% in March.
Moreover, low oil prices aren't yet getting entirely reflected at the pump. Crude costs 51% less than it did a year ago, but gasoline futures are down by just 37%. So as the peak summer driving season passes, gasoline prices should fall.
And that should give consumers even more wherewithal to spend more money elsewhere.
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