The Atlanta Fed updated its projection for 2016 Q1 GDP on Monday. They lowered it to 0.6% from 1.4% on Friday.
GDPNow, the Atlanta Fed’s web site, cited first-quarter real consumer spending falling from 2.5% to 1.8% for the downgrade.
If you look at the stocks of retailers you can see how bad the situation is for consumers. It ranges from high-end luxury on down to the dollar stores.
Across the board, consumers are pulling back despite the “gas price premium.” Discretionary spending is not going anywhere in 2016, despite an initial rosy outlook by the Commerce Department report.
Consumer spending, which accounts for as much as 70 percent of the US economy, was previously reported to be 0.5 percent in the first month of the year but was revised down to 0.1% for January. February’s spending was -0.1%.
The consumer does not have a sense that things will get better anytime soon and is probably putting off purchases. This is part of the definition of price deflation. When wages are depressed as long as they have been in the US, prices and demand should hit a ceiling and fall back.
These reports show that the “green shoots” of spring will die on the vine as I wrote yesterday before these reports were released.