Richard DeKaser, the best forecaster of U.S. consumer spending, projects expenditures will “rebound somewhat” in the second half of the year, reflecting the drop in fuel costs and a recovery in auto sales.
The deputy chief economist at the Boston-based Parthenon Group calls for a 2.5 percent gain in spending in the second half of the year and 1.7 percent next year. Purchases rose at a 0.1 percent annual rate in the second quarter, the worst performance in two years, according to Commerce Department data.
Gasoline prices that rose to a two-year high of $3.99 a gallon in early May have fallen about 30 cents on average, giving households more money to buy other goods and services. Auto and parts shortages prompted by Japan’s March earthquake have eased, paving the way for a pickup in car output and sales, DeKaser said.
“With energy prices now lower, and car inventories and production improving, consumer spending is likely to rebound somewhat,” said DeKaser, whose projections for the two years ended in June were the most accurate of economists surveyed by Bloomberg News. “Part of the recent slowdown reflects temporary developments that have largely played out.”
Early figures bear out DeKaser’s view. Auto sales rose to a 12.2 million unit annual rate in July from 11.4 million the prior month, according to industry data issued today. It was automakers’ best performance in three months.
Household purchases unexpectedly fell in June for the first time in almost two years and savings climbed, figures from the Commerce Department showed today. Purchases declined 0.2 percent after a 0.1 percent gain the prior month. DeKaser, 51, forecast a 0.1 percent advance for the month.
DeKaser, working with chief economist Roger Brinner, said Parthenon will probably lower gross domestic product forecasts next week following government revisions that showed the 2007-2009 recession was deeper than previously reported.
DeKaser said the scheduled expiration in December of a 2 percent payroll tax cut and of Bush-era reductions late next year would weigh further on consumers already coping with high debt loads and stagnant wages. “It’s going to be a long, slow grind for consumer spending,” he said.