U.S. consumer spending accounts for about 68 percent of gross domestic product (GDP). As goes the consumer, so goes the economy. This month, we look at various aspects of Americans’ economic behavior and factors that tend to drive spending such as attitudes, income and wealth. In particular, we highlight areas that may contribute to consumer sentiment since historically this has been a good indicator for future consumption (Chart 1).
Over the first three months of 2015, data suggest that real GDP growth may have decelerated from the 2.2 percent annualized rate of the previous quarter – perhaps to 1.0 percent or less. However, gains in jobs, income, and wealth over the past year have helped push U.S. consumer sentiment higher. Should the historical relationship between consumer sentiment and spending hold, we would expect to see a rebound in purchasing over the next several months. This would support our view that the economy’s current weakness is temporary and that growth is likely to reaccelerate in the second quarter.