More than 70 percent of the U.S. economy is driven by consumer spending. Small wonder that the monthly retail sales report, which today showed a 0.6 percent increase, gets so much attention. Those official reports are valuable, but data collected by payments companies can provide more detailed information real-time.
For example, MasterCard Advisors combines its tracking of tens of billions of transactions with proprietary algorithms to createmonthly estimatesof retail spending for the U.S., U.K. and Canada. Yesterday, I interviewed Sarah Quinlan, the head of MasterCard Advisors' Market Insights group, about theirlatest report, which came out earlier this week. The U.S. economy continues to grow at a relatively weak pace. However, it is outperforming most other large countries.
A few things that caught my attention from the MasterCard data:
- Since the end of 2009, growth in U.S. consumer spending has been driven largely by luxury goods and consumer staples. The middle class has less disposable income (or access to credit) available for discretionary purchases.
- That said, U.S. purchases of high-end jewelry have grown much more slowly than total retail spending. Moreover, high-end jewelry spending hasn't matched its peak in December 2007.
- The rebound in the U.S. housing market was first evident in spending on home furnishings, which started picking up in the beginning of 2012.
- Americans are shifting a greater share of their spending online. The value of Internet purchases rose at an average annual rate of more than 10 percent throughout the recession and the recovery. Intriguingly, online spending seems less sensitive to the health of the economy than spending in stores. (Internet commerce is also less sensitive to the weather, which shouldn't be surprising.)
- Consumption in Canada has been weaker than in the U.S. for several years despite a much healthier labor market. This might be explained by the slowdown in China and the contraction in commodity demand. The Canadian stock market peaked in early 2011. The price of Canada's benchmark stock index has been little changed since August 2011, while the U.S. Standard & Poor's 500 Index has increased by about 30 percent during the same period.
- U.K. luxury spending seems to be at least partly driven by the prices of oil and natural gas. That suggests that wealthy Russians and Middle Easterners are a significant source of demand for high-end goods in British stores.
- The U.S., U.K. and Canada have all experienced a surge in "staycations" as families avoid expensive travel in favor of simpler -- and cheaper -- pleasures at home.
Some highlights from the recent data:
- The growth of U.S. retail spending (excluding autos) slowed from an annual average pace of 8 percent in 2011 to 5.1 percent in 2012. In the first five months of 2013, U.S. retail sales have been growing at an annual average pace of just 3.5 percent.
- U.S. spending on home furnishings and repairs continues to be robust, which suggests that the housing recovery still has some legs.
- On the other hand, Quinlan says that the surge in spending on auto maintenance means that people are reluctant to buy new cars, preferring instead to repair what they already own. Similarly, there has been a significant decline in auto parts sales since the end of 2012.
- U.S. consumers have been cutting spending on electronics, air travel and gasoline since the beginning of the year. In contrast, sales of necessities such as groceries and baby clothes are robust.
- Perhaps reflecting the global sell-off in commodities, spending on luxury goods in the U.K. has been declining from prior-year periods for the past six months. Growth in U.S. luxury spending has slower than total U.S. retail sales in the first few months of 2013.
- MasterCard Advisors estimates that Canadian retail spending has only increased by 0.5 percent in the past 12 months. As recently as March, the 12-month change in consumer spending was actually negative.
While most are seeing today's retail report as good news, a detailed look at our collective credit-card bill gives us a picture of a consumer who still is not at ease with the state of the economy.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Matthew C Klein