U.S.: All Is Not Gloom On The Consumer Front

With consumer confidence heading south and retailers bemoaning a disappointing holiday season, you might conclude that consumers have decided to shut their wallets and sit the winter out--with potentially dire consequences for the economy. However, if that's the case, why did fourth-quarter consumer outlays for services grow at one of the fastest rates of this expansion?

The answer is that the consumer slowdown has been concentrated in the purchases of goods, especially durable goods, such as cars and computers (chart). The full fourth-quarter data will not be available until the Jan. 31 report on gross domestic product. But based on monthly data, household outlays for goods were about flat from the third quarter, one of the worst showings since 1991. Spending on services, however, seems to have grown at a strong annual rate of about 5%.