Macroeconomics

Data show consumers might be focused paying back debt.

Although news on Consumption Expenditures show a decrease in nondurable goods, that does not mean consumers are cutting back expenditure severely. Thus far –June 25th 2015-, economists believe the demand side of the economy affected economic growth in the first quarter of 2015. Data released on June 25th by the U.S. Bureau of Economic Analysis unveiled expenditures in nondurable goods dragged down personal consumption. Bear in mind that nondurable goods are mostly the set of products that consumers buy without using loans. This may indicate that consumers might be offsetting previous expenditure financed by loans. In other words, consumers might be paying back debt, as Durable goods also declined but did not so as sharply as nondurable did.

Consumption

This very fact shows consumers spend responsible nowadays, which is promising for the months to come inasmuch as consumers balance their budgets. In spite of the actual decrease, the news are indeed positive in that regard. In fact, when comparing the same data on a year basis, Households experienced an increase in consumption expenditures of about 3.4% during the month of May 2015, when compared to the same month in 2014. Data also allow for some inferences about the role that interest rates are playing in both incentivizing and preventing consumption. If indeed, the data reveal that consumer spend nowadays responsible, monetary policy will find in that very fact a limit for its own policy purpose.

 

Consumption 2

On the other hand, the U.S. Bureau of Economic Analysis reported on June 25th that for the month of May, Personal Income increased 79 billion which equals 0.5% change from preceding month. Personal Disposable Income (DPI) also increased by the same percentage. Nominally speaking, Personal Consumption (PCE) expenditures increased $105.9 billion, or 0.9 percent. In April, personal income increased $69.6 billion, or 0.5 percent, DPI increased $57.0 billion, or 0.4 percent, and PCE increased $8.5 billion, or 0.1 percent, based on revised estimates.

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