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May 15, 2018 Blog 1 min read
Household spending growth remains subdued despite an upbeat consumer mood.
Wealth Management Retail Sales ChartRetail sales rose by 0.3% in April, matching economist expectations, while reflecting a moderate softening from an upwardly revised 0.8% in March. Excluding vehicle results, core sales were also up 0.3% for the month.

The month-to-month data has been somewhat soggy in recent months, but year-over-year sales growth has trended higher over the past three months, reaching 4.7% for the 12 months ended April 30 from the January low of 3.8%.

Given the degree of strength in many measures of the consumer mood, it may seem surprising that household spending growth has been somewhat restrained.

Strong labor market conditions have emboldened consumers, but wage growth has been slow to accelerate even as the expansion nears its nine-year anniversary. Still there are signs that wage growth is picking up. That, coupled with tax cuts that went into effect earlier this year, should provide a bit more discretionary income in household budgets. Some of that additional cash will be used for savings, investment, or debt reduction, but a portion will undoubtedly filter through to consumer spending.

The bottom line is that consumers remain very upbeat, but household spending remains somewhat restrained. The near-term effect is that the economy as a whole continues to grow, but at a pace that is diminished by that restraint. Households seem to be much more cautious than was the case at the peak of the last cycle when the housing boom and excessive consumer borrowing ultimately helped to bring the economy down.

That’s not a bad thing. Consumer spending habits appear to be far from overheating, providing further runway for consumer spending growth, and further support for the broad economy to continue to grow as well.
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