Consumer spending in U.S. continues to be strong

“The US is a bright spot in the global economy,” says IHS chief economist Dr. Nariman Behravesh, “ and within the U.S. it’s the consumer that is the bright spot.”

Speaking at the TPM Conference in Long Beach this week, he noted that consumer spending was extremely strong in January, but even over a three month period consumer spending has been strong.

“Best guess, consumer spending after adjusting for inflation in the U.S. is 3.0% - that is really solid growth,” he said. “So the consumer, which represents 70% of the economy, is driving growth. Housing is also driving growth as well, not as strong, but together they are about 80% of the economy. So 80% of the U.S. is doing rather well.  In addition, income growth is good, job growth is good, and interest rates are low, which is helping to support these sectors of the economy.”

But Behravesh allowed that there are negatives, three of them that are worth mentioning – one of which is trade.

“The dollar is strong, which means trade is a drag on U.S. growth. Another is this very dramatic plunge in capital spending in the energy sector due to the huge drop in oil prices – capital spending is half of what it was two years ago. And finally is that we seem to be in the middle of an inventory cycle.”