The revised Gross Domestic Product report, released May 27, indicates consumers are playing their role in economic growth again. Or does it?
At first glance, the revised GDP report showing all the goods and services America purchased and produced in the first quarter of 2010 was a real snoozer. The quarterly increase was revised downward to 3 percent from 3.2 percent, according to the Bureau of Economic Analysis.
Not only did analysts shrug off the slight change, but no one was exactly jumping for joy (or fear) after seeing how much money consumers had spent, which turned out to be 3.5 percent more than the last quarter of 2009. Even a straight comparison from the first quarter in 2010 to that same time frame last year doesn't seem particularly exciting. That's because we -- that's you, me and all of our neighbors whose spending makes up 71 percent of the country's GDP -- spent 1.7 percent more, an amount the government today shaved down from 1.8 percent.
"They just read past it," says Mark Vitner, managing director and senior economist at Wells Fargo & Co. in Charlotte, N.C. "The headline was the same. Most of the revisions were fairly small."
But deep inside the report, there's way more to the story, particularly when looking at the year-to-year comparisons. Since 2009, it seems Americans were successfully tempted by government incentives and retail discounts and plunked down cash for the most expensive of all items, the kind of stuff purchased only when one is serious about spending money.
The proof is that Americans spent 6.4 percent more in the first quarter 2010 on durable goods, which are the typically big-ticket items built to last more than three years. Spending on durable items was actually two shades bigger than the 6.2 percent the government had originally reported.
Large appliances flying out the doorWhat are we buying? For starters, we all spent 5.6 percent more over the past year on large appliances.
It's likely no coincidence that also during the first quarter about 14 U.S. states participated in the federally funded appliance rebate program. That initiative handed out some $70 million worth of refunds -- amounting to 20 percent of the purchase price -- for a select group of energy-efficient appliances to the consumers who scooped them up first.
"The Cash for Appliance program was very popular," says Craig Fishel, spokesman for The Home Depot in Atlanta. "Just look at the amount of time it took for the funds to be used. Rhode Island ran out of money in a matter of hours."
We apparently still had more money to spend and decided to concentrate on the rest of our homes, buying up sofas and tables (up 3.5 percent from last year) clocks, lamps and lighting fixtures (up 10.1 percent) and window coverings (up 12.7 percent). We had little choice, it seems, when you consider that furniture sales maintain a cozy correlation with home sales -- and those have been soaring too, thanks to government incentives for first-time and repeat buyers, says Ray Allegrezza, editor in chief of the Greensboro, N.C.-based trade publication Furniture Today.
He speculates that much of the decor-shopping for those new abodes happened early this year, after contracts were signed and before they recently closed up 14 percent in April.
"We're actually now seeing some spot shortages because retailers haven't been stocking inventories," says Allegrezza.