In May, US households consumption dropped by -0.1% after -0.2% in April. Carry over growth for the second quarter is just 1.2% at the end of May. This figure must be compared to the meager 1% of the first quarter (with a contribution of 0.7% to GDP quarterly growth). Yesterday I mentioned that May figures would be important after the downward revision of Q1 GDP growth (see my post this morning)
Technically consumption growth could be positive for the second quarter but if the momentum seen in April and May is still there in June then Q3 consumption growth could be close to 0.(*)
The US scenario is at risk and the spillover from the US to the rest of the world could be weaker than expected. It is not good news.
The Federal Reserve will have to send a more accommodative message.
(*) Growth compares the average value of Q2 consumption to the average value of Q1. If March in Q1 is strong, Q2 starts at a level higher than Q1 average. This could imply positive consumption growth (that’s what could happen in Q2 in the US). But if June is lower than Q2 average then Q3 will start below Q2 average and this could lead to a poor Q3 number