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Americans Raid Their Piggy Banks To Finance Spending: April 17, 2012

ByThe National Bank of Canada
Published 04/17/2012, 04:40 AM
Updated 05/14/2017, 06:45 AM

March’s retail report stateside was quite strong to say the least. The 0.8% monthly increase in retail sales was in large part due to discretionary spending, i.e. sales excluding gasoline, groceries, health/personal care which rose for the tenth consecutive month. For Q1 as a whole, retail volumes grew at an annualized pace of around 5%, suggesting a healthy contribution to GDP from consumers. The resilience in consumer spending, considering that gasoline prices soared in the quarter, can be explained by a better employment picture. But temporary factors were also at play.

A mild winter allowed not just for significant savings on energy bills but also increased spending on seasonal items like clothing and sporting goods. So part of Q1’s growth was likely borrowed from Q2. Moreover, it’s clear that some of the spending spree in Q1 was a result of Americans raiding their piggy banks, with the savings rate dropping to a two-and-a-half year low in February. That, of course, isn’t sustainable. So unless employment picks up speed, America’s primary growth engine, namely consumption spending, could shift down a gear or two in the second quarter of the year.
U.S. Americans Raid Their Piggy Banks To Finance Spending

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