July 30, 2021
Consumers spend more on services in 2nd quarter, less on durable goods
Consumer spending continued to grow in the second quarter, but its rate of expansion was much slower than the previous quarter, according to Thursday’s report from the federal Bureau of Economic Analysis.
By Mary Hightower
U of A System Division of Agriculture
Fast facts
- Consumer spending rises 11.8 percent in second quarter
- GDP grows, but misses analyst expectations
- Full analysis of this report: https://bit.ly/3y8Pjjw
(483 words)
(Newsrooms – with chart https://flic.kr/p/2me8R19)
FAYETTEVILLE, Ark. — Consumer spending continued to grow in the second quarter, but its rate of expansion was much slower than the previous quarter, according to Thursday’s report from the federal Bureau of Economic Analysis.
Personal consumption expenditures increased by 11.8 percent in the second quarter.
“Spending was up by about the same amount on both goods and services, but those similar figures imply quite different changes in consumer behavior compared to the first quarter of the year,” said John Anderson, economist with the University of Arkansas System Division of Agriculture and the U of A’s Dale Bumpers College of Agricultural, Food and Life Sciences.
“The 11.6 percent increase in spending on goods in the second quarter was a significant drop from the first quarter’s increase of more than 27 percent,” Anderson said.
He said the major difference was in spending on durable goods, which posted a 9.9 percent increase in the second quarter compared to a 50 percent increase in the first quarter.
“Consumer spending on durable goods continued to show historically strong growth in the second quarter, but the gains in spending were far smaller than in the previous quarter,” Anderson said.
Spending on services rises
By contrast, spending on services posted a 12 percent increase in the second quarter compared to just a 3.9 percent increase in the first quarter. This category includes spending on hospitality and leisure activities — restaurants, movies, amusement parks and the like. The jump in spending on such items in the second quarter suggests that as vaccines became available and restrictions on activities eased, consumers responded accordingly.
Anderson sees some positive indicators.
Spending on goods — particularly durable goods like cars and appliances — slowed down while spending on services such as eating out and going to amusement parks accelerated,” he said. “This suggests a return to a more normal balance of spending by consumers; and any sign of a return to the pre-pandemic normal is a hopeful sign.”
Gross domestic product
The gross domestic product, or GDP, also grew 6.5 percent in the second quarter, according to the BEA report. That followed 6.3 percent growth in the first quarter. While those rates are high compared with previous years, the numbers were below analyst expectations.
“Pre-report expectations were for a second quarter figure closer to 9 percent annual growth in real GDP,” Anderson said. “In short, the second quarter showed continuing recovery from pandemic effects but not quite as robust of a recovery as the market was expecting and, no doubt, hoping for.”
Anderson said that among the major components of GDP, government consumption expenditures and gross investment was the weakest.
“At the federal level, this class of spending fell by 5 percent in the second quarter,” he said. “A significant decline was to be expected, as a number of COVID-related support programs had begun to phase out. This decline in government spending was more than offset by a significant gain in spending by consumers.”
See Anderson’s full analysis of this report: https://bit.ly/3y8Pjjw.
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: aaes.uada.edu. Follow on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.
About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
Media contact: Mary Hightower
mhightower@uada.edu