Two internet headlines from yesterday:
“U.S. consumer spending jumps in August” (Wall Street Journal MarketWatch)
“Consumer Spending in U.S. Stagnates” (Bloomberg)
So what gives? Different data?
No. Same data. Both were based on the same report from the Bureau of Economic Analysis.
It took me a little time with the data to figure out the disparity. MarketWatch reports that “Spending rose by 0.5% in August — the fastest rate since February”. Meanwhile Bloomberg states that “Purchases rose 0.1 percent after adjusting for inflation”.
The key phrase here is “after adjusting for inflation”.
The MarketWatch report was talking about nominal spending. Without adjusting for price changes, consumer spending did increase 0.5% in August.
However, average prices increased 0.4%. So, after adjusting for inflation, real consumer spending increased by only 0.1%.
Which is right? MarketWatch or Bloomberg?
Well, technically both. But which is more relevant? I’d have to say the Bloomberg report. Real changes are (almost) always the most important and relevant factors for determining human behavior, unless it’s a situation where consumers aren’t aware of price differences.
Why MarketWatch chose to focus on the nominal, un-adjusted numbers is a mystery.
So bottom line, consumer spending barely budged in August. Not great news for the economy.