The net value of goods and service produced by the U.S. economy during the summer increased at a 3.5% annual rate. That followed a solid Spring quarter, which was up 4.2%. Sustained U.S. economic growth rate over the last six months was the strongest since 2014. Consumers played a pivotal role in that growth by upping spending at a 3.8% to 4.0% rate.
Consumer spending choices during the last six months reflected a preference for bigger-ticket discretionary purchases such as autos, furniture, and recreational goods. The latter category registered 9.4% and 12.4% quarter-to-quarter gains in the last two quarters. The only other sector of the economy posting bigger gains for the six month period was business investment in computer software. To provide some context, in terms of actual dollars spent, consumer spending on recreational goods is 1% to 2% larger than business investment in software.
The spending category labeled “food and beverages purchased for off-premises consumption,” for the most part grocery store spending, was up 2.8% and 4.0% for the Spring and Summer quarters, respectively. Those increases fall into the middle range of growth for this sector during the last two years. Meanwhile, the spending category “food services and accommodations” jumped 8.1% and 6.9% during the Spring and Summer quarters, capturing the preference for away-from-home (e.g., restaurants) meals.
Wholesale market measures of beef demand were consistent with trends in consumer spending choices. Beef has more exposure to foodservice marketing channels than pork. The Choice beef cutout this summer was up 3% from a year ago, even as beef supplies from steers and heifers increased by 0.5%. More product sold at a higher price is the essence of favorable demand. Impressive export growth also played a role in this situation. By comparison, pork production was up 1.2% from a year earlier during the Summer, and hog carcass values were down 17% from the previous year. Lack of foodservice efforts to promote bacon was a noticeable difference this year compared to last year. Market conditions for chicken suggest problems. Breast meat values in wholesale marketing channels were down 23% from a year ago during the Summer with production only up 3.5%. Finally, cheese usage this Summer was up 7% from a year earlier with Cheddar cheese prices averaging 3% less. During the Spring quarter, cheese usage was only up 1% from the prior Spring.