Video: Understanding the trends in US consumption
Interview of Chris Christopher on understanding the trends in US consumption.
Interview Transcript
What are the key economic factors impacting the American consumer today?
There's two major key macroeconomic effects that are having a strong impact on the American consumer. First, a stronger dollar means that consumer-good imports are relatively cheaper, and that has a strong impact on consumer price inflation in favor of the consumer.
In addition, lower oil prices means that consumers have a little bit more spending power-they're spending less money at the pump and more on discretionary items. However, for those who depend on the energy markets-such as people who live in West Texas or North Dakota-this is not the best thing for their livelihoods.
What is the state of mind of the American consumer?
In addition to lower pump prices and modest consumer price inflation, there are three other factors that are sort of looking very bright for American consumers. First is better job prospects. Second, wage growth is increasing and is outpacing consumer price inflation. And consumer confidence is relatively elevated. All this helps consumers spend more, and for millennials, it helps them think of getting married, having a house, having children. And all this is a very strong positive for the American economy.
How will consumer spending patterns change in the near term?
Consumer spending patterns are going to change quite a bit in the near term and have been changing slowly over the past year. First, there'll be more consumer balancing in the near term. People are going by less automobiles and more other types of discretionary items. The pent-up demand for autos has played itself out, and that leaves a little bit more room for other big-ticket items and more expensive clothing.
The other thing that's happening, due to lower oil prices, is that Americans are buying more light trucks over autos. In addition, the lower pump prices are sort of enticing Americans to go eat out, drink out, and dine in less.
Of course, the one thing that's always happening for about the past five or six years, is that online retail sales is gaining share over the brick-and-mortars.
Chris Christopheris director, global economics, IHS Economics