Today’s GDP release provided evidence that the economy not only gathered a bit more steam in the third quarter, but grew at a faster pace than previously believed.
Consumers are continuing to slowly increase spending, although new home construction remains mired in a funk.
Quarterly results for personal consumption expenditures marked a high point since the fourth quarter of 2006. A resilient consumer remains critical to the overall recovery
Sentiment is slow to improve given the limited forward momentum in job creation, the depressed housing market, and the overhang of indebtedness.
Nonetheless, consumers appear to be slowly regaining enough confidence to increase their spending habits while still maintaining a greater focus on savings and debt reduction than in the period leading up to the recession and credit crisis.
We remain a long way off from the free-wheeling, borrow-to-spend environment that consumers embraced in the mid-2000s. Nonetheless, Americans appear to be settling into a middle ground of slow spending growth and debt reduction. That could be sustainable for some period so long as personal income continues to grow, job creation picks up, and inflation remains in check.
From a big picture perspective, the risk of a double-dip recession continues to fade and the economy appears to be settling in for the next phase of the economic cycle, likely to be characterized by sub-par growth, but growth nonetheless.