On the first day of the newly minted Bernanke era, the pressing question is whether the economy’s slowing, and if so, is it slowing more than a little?
The topic returned to the limelight last week when the first estimate of the nation’s gross domestic product surprised with a sharply lower rate of growth than the dismal science was expecting. Optimists quickly responded that something was rotten in the data, and that future revisions of GDP would return the official measure of the economy’s pace to form, namely, robust growth.
Judging by consumer spending of late, the optimists have reason to cheer. As the government reported on Monday, Joe Sixpack and his friends are in no mood to reign in their spendthrift ways. Personal consumption rose a strong 0.9% in December, as it did in November, based on revised numbers. Back-to-back strength, in no uncertain terms. Take that, you pessimists. Underscoring the trend is the fact that durable goods purchases were in the driver’s seat for pushing overall consumption higher in the final two months of 2005.
If a sharp slowdown, or worse, is coming, Joe seems cheerfully oblivious to the threat. As such, one might wonder if a slowdown is probable, or even possible if Joe and his buddies aren’t on board with the idea. Personal consumption spending, after all, represents around 70% of GDP. As goes consumers’ willingness to use the heralded credit card, so goes the economy.