WASHINGTON – Four years after the end of the Great Recession, the consumer is back — just not with a vengeance.
Consumption continues to show improvement, and yet Americans still clutch their wallets.
“We’re sort of at a glass half-full,” said Ken Goldstein, an economist with the New York-based Conference Board, which measures consumer confidence.
On the plus side, rising home prices, improved job numbers and a falling unemployment rate are bolstering how consumers feel about the economy.
“All of that has sort of reaffirmed consumer expectations that this thing would finally turn around,” Goldstein said.
In its latest monthly reading, the Conference Board reported Tuesday that its confidence index hit levels last seen in January 2008, shortly before the financial crisis started.
“This is a good report. Consumer confidence has gained significant traction and is likely to help retailers in the coming months as the back-to-school shopping season starts heating up,” Chris Christopher, an economist with forecaster IHS Global Insight, said in a note to investors.
Sentiment and behavior, however, are different matters.
The Bureau of Economic Analysis, in its final revision of growth figures for the first three months of this year, said Wednesday that consumption had risen by 2.6 percent, not 3.4 percent as earlier thought. Since consumption drives roughly two-thirds of U.S. economic activity, the bureau shaved its growth estimate for the first quarter from 2.4 percent to a more lukewarm 1.8 percent.
Consumers are spending more but not with gusto, according to the National Retail Federation. In its latest monthly economic outlook, the group said that through May, retail sales — excluding autos and restaurant meals — had risen by 4.8 percent over a 12-month period.
“Despite the sting of higher [payroll] taxes and government spending cuts, consumers are spending. April’s improvement does not alter our view that current spending behavior remains constrained and cautious,” Jack Kleinhenz, the group’s chief economist, wrote in his June report. “We do expect, however, spending through the second half of 2013 will pick up, offsetting the modest levels seen during the spring.”
Auto sales remain the brightest spot. Car sales in May were up 5.7 percent compared with the same month last year, while light trucks and SUVs were respectively up 10.9 percent and 14.3 percent over May 2012.
“There have been improvements in the standards for the auto loans, and there has been sort of a loosening, and you can see that in sales,” said Daniil Manaenkov, an economic researcher at the University of Michigan, which publishes a quarterly model of the U.S. economy.
Easier bank loans have helped car sales, but the surge in sales of pickups is thought also to be tied to the rebound in the housing sector, which brings more opportunity for tradesmen, Manaenkov said.
Pent-up demand is helping, too. Amid the economic crisis in 2009, vehicle sales plunged to 10.4 million. The average age of U.S. vehicles rose above 11 years in 2011 and 2012. But the R.L. Polk automotive research group now forecasts 15.3 million new-vehicle registrations this year, up 6.6 percent over last year.
“When are we going to see folks do that with that old sofa, refrigerator, washing machine and so on? That hasn’t happened yet,” said Goldstein, who thinks flat wage growth is partly to blame. “If we start to see a pickup there, and we continue to see job growth, then the financial shoe would hit the floor.”