Guess what: rising energy prices are taking a toll on consumers.
On Monday the Bureau of Economic Analysis released details on personal consumption expenditures for February, allowing us to update our graph of how big a share energy is in American budgets. A 6% expenditure share marked the point at which we started to see significant consumption responses a few years ago. The share in February is essentially there (5.98%, to be exact), the highest it’s been since October 2008. For poorer households, energy’s budget bite is a significantly larger percentage.
|Energy expenditures as a percentage of consumer spending. Calculated as 100 times nominal monthly consumption expenditures on energy goods and services divided by total personal consumption expenditures. Data source: BEA Table 2.3.5U. Blue line is drawn at 6.0%.|
Not surprisingly, overall spending on other items is slowing down. Real personal consumption expenditures grew at a 3% annual rate in February after falling slightly in January. Bill McBride (and you know I don’t like to argue with him) thinks this means real consumption spending for 2011:Q1 may only grow at a 1.4% annual rate. That’s less than half the rate that many analysts had been anticipating prior to Monday’s data.
You probably also know that gasoline prices have been climbing from their average values in February.
Originally published at Econbrowser and reproduced here with permission.