Durable Goods Spending Continued Torrid Growth in February

Thanks to low interest rates, stimulus, and shifting spending patterns, consumer durable goods spending continued to grow at its fastest rate in decades. 

In February, real consumer durable goods spending was $2,106.6 billion. Compared with one year ago, durable goods spending increased 16.1%, which was the fastest rate of month-over-month growth since October 1998 except for last month. In the eight of the last nine months, month-over-month growth was more than 11%. The only exception was December when the growth rate was still almost 9%, nearly double the historic average. The annual rate of growth accelerated for the ninth straight month to 8.2%, which was the fastest rate of growth since September 2015.

While durable goods spending grew at an accelerating rate since the economic lockdowns started, total consumer spending contracted at an accelerating rate (total consumer spending contracted at an annual rate of 4.6% in February). Durable goods spending accounted for more than 16% of total consumer spending for the second month in a row. Multi-decade trends show that durable goods spending steadily increased its share of total consumer spending while services decreased its shares. While the workforce may be trending toward a service economy, consumer spending is trending toward a manufacturing economy.

The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was 0.17%. The nominal rate is rising faster than the rate of inflation, which was 1.68% in February, according to the CPI. February was the first month since December 2019 that the real rate was above 0%.

In February, the year-over-year change in the real rate was 63 basis points, which was the second month in a row that the change was positive and growing. Also, this was the highest level for the year-over-year change in the real rate since March 2016.

Below are key spending categories that lead the most important manufacturing new orders and production indices. 

Accelerating Growth: durable goods, electronics, food/beverage, motor vehicles/parts, other non-durable goods, pleasure boats

Decelerating Growth: 

Accelerating Contraction: air transportation services, appliances, medical care, total consumer

Decelerating Contraction: clothing/footwear

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