Household Discretionary Spending Growth Remains Below Previous Recoveries

Industry Updates  »  Household Discretionary Spending Growth Remains Below Previous Recoveries

Economic growth post-recession for this cycle has been very low with an average of about 2% annually. Since roughly 2/3 of GDP is comprised of consumer expenditures, the level of consumer spending is obviously very important when gauging economic conditions. An important indicator of this is consumer confidence, which in turn influences household spending behavior. 

More specifically, discretionary household expenditures, those which consumers can do without, provide a more precise indication of consumer confidence and expectations. Recent data indicates that though it has taken 10 years, household spending on discretionary services has returned to 2007 levels.

However, the rate of spending growth since the low point of the recession (June of 2009) remains well below that of previous recoveries.

The graphic below by Jonathan McCarthy from the New York Fed Research and Statistics Group depicts this. As shown, the rate of growth of household discretionary services spending is well below that of previous recoveries. 

This is important as it suggests consumers remain cautious concerning the future economic outlook. And, as indicated in a previous post, consumer spending has helped buoy the economy in the last few years. 

The most recent article can be accessed here:

and earlier articles concerning the topic here:

and here:

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