With stocks at a new high for the year, pent-up demand from the snowstorms of prior weeks, and perhaps the arrival of some tax refunds, Americans' self-reported spending reached its highest level of the year during the week ending March 14, Gallup reports.
Prior to last week, 2010 consumer spending was adhering to the "new normal" established in 2009. “The question going forward is whether this new spending represents the beginning of a new, higher level of consumer spending -- somewhere between 2008 and 2009 spending levels -- or simply a short-term aberration in the "new normal" trend,” the polling firm said. “If this trend continues, it could lead to a much-improved sales environment for the nation's retailers and small businesses. In turn, increased sales should stimulate new private-sector hiring -- the basis for a real, sustainable economic recovery. A stronger economy."
In its analysis of U.S. consumer spending, January-March, 2008-2010, Gallup said that the increase in spending last week is "particularly encouraging, given that it was not a 'paycheck week.' " With an average of $72 per day last week, spending was up 20 percent from the prior week ($60), up 31 percent from the same week a year ago ($55), and at its highest level since the week ending December 20.
But Gallup said if this is the beginning of a new spending trend, it doesn't appear to have been inspired by job creation. “While job market conditions have improved compared to a year ago, most of the change comes from lower percentages of employees reporting that their companies are letting people go; there has been little growth in the percentage saying their companies are hiring,” the research firm said.
Caution is warranted, Gallup said, given the fact that the current uptick in spending is based on only a couple of weeks of data for March and has been accompanied by essentially no improvement in hiring. “But it would be good news if the optimism on Wall Street this year finally began to translate into a better economy on Main Street,” Gallup said.