Tags: Goldman Sachs | savings | wages | economy

Goldman: Consumer Spending Will Grow With Wages, Lower Gas Prices

By    |   Monday, 09 March 2015 07:00 AM

Consumer spending this year will increase as more people get jobs and feel confident enough to open their wallets again, according to Goldman Sachs.

The bank said a key indicator of personal consumption will be how much Americans save from their growing paychecks.

“Our analysis points to a solid — but not spectacular — outlook for consumption in coming quarters, as some of the gains in real disposable income are likely to be saved in the near term,” Sven Jari Stehn, an analyst on the team of Goldman Sachs head economist Jan Hatzius, said. “This solid outlook for consumption is a key reason why we continue to expect 3 percent GDP growth for the remainder of 2015 despite the slowdown in the broader economic dataflow in recent weeks.”

U.S. gross domestic product, a measure of total economic output, slowed to 2.2 percent annual growth in the fourth quarter from 2.6 percent in the prior three months. Meanwhile, economic data ranging from retail sales to factory orders have been weaker than economists expected in the most recent reporting period.

Goldman Sachs estimates that consumption will grow by 3.5 percent to 4 percent in 2015 and by 2.5 percent in 2016 as personal income advances with improvements in the jobs market. Its forecast shows a short-term jump in the savings rate as people pocket their extra income, but that rate will slide by the middle of this year.

With inflation falling, the bank estimates disposable income will grow by 4 percent in real terms this year.

“U.S. consumers are experiencing a substantial boost to real income growth, which is partly due to the better labor market and partly due to the sharp decline in oil prices,” Stehn said in a March 4 report obtained by Newsmax Finance.

Healthcare took a bigger slice of U.S. consumer income in 2014, according to the U.S. Commerce Department.

About 20.6 percent of total consumer spending went to health costs last year, up from 20.4 percent in 2013, according to MarketWatch.

“For now there’s little evidence that Obamacare, now in its early stages, has had a huge effect on health-care outlays,” reported MarketWatch’s Jeffry Bartash. “ The rate of spending slowed after a sharp advance from 2000 to 2009, largely because of sluggish U.S. economic growth after the crushing 2007-2009 recession.”

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Consumer spending this year will increase as more people get jobs and feel confident enough to open their wallets again, according to Goldman Sachs. The bank said a key indicator of personal consumption will be how much Americans save from their growing paychecks.
Goldman Sachs, savings, wages, economy
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2015-00-09
Monday, 09 March 2015 07:00 AM
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