President Donald Trump’s first GDP report will be marred by something that he has at various times said doesn’t exist: climate change.
Early Friday, the Commerce Department released the latest data on consumer spending. The number wasn’t great: up just 0.1% in February, or down by the same magnitude when inflation is counted.
But look at what consumers aren’t spending money on. Household utilities spending dropped 2% in February, and 2017 household utilities spending is down about 7% from fourth-quarter levels.
That’s not a surprise. It was the second-warmest February in 123 years. The December-through-February period was the second warmest on record, trailing only the prior year.
With that unexpected reason for not turning on, or up, the heat, Americans quite reasonably pocketed rather than spent the remainder. The savings rate has grown from 5.2% in December to 5.4% in January and 5.6% in February.
Reasonable behavior or not, first-quarter GDP isn’t going to look good. The latest incarnation of the Atlanta Fed’s GDPNow tracker forecasts GDP growth of just 0.9%, and consumption growth of 0.8%, the latter of which would be the worst showing in nearly four years.
It’s an odd time for thriftiness, given the surge in consumer sentiment since the Trump election.
And when asked, consumers do say they’re planning to spend more — on cars, appliances, carpeting — pretty much everything but vacations, according to data released earlier this week by the Conference Board.
Even for consumers who don’t believe Trump will rev up the economy, the jobless rate in February matched a recovery-era low, and earnings growth was near recovery-era highs.
It’s why economists inside and outside the Federal Reserve aren’t too worried about the ugly GDP print the U.S. is likely to see.
And maybe the GDP report will provide a modicum of cognitive dissonance to a president not inclined to worry about the environment.