The U.S. government reported that spending by consumers fell 0.1% in April, an $8.1 billion drop and the first decline in a year. It missed forecasts of a 0.2% gain.
Still, there are three reasons to discount the spin saying the number points to slower-than-expected growth at midyear.
1. The weather did it.
Sounds weird to still be talking polar vortex after Memorial Day but even if your idea of summer whites is sweat socks it's still true.
Look, consumer spending rose $117.6 billion in March -- a full percentage-point gain, the biggest since 2009. Why? Because it rose just 0.2% in January and 0.1% in December, when people were stuck at home in big swaths of the nation. In parts of February and March, Nanook of the North emerged from his igloo -- which, strangely, seemed to have journeyed as far south as Atlanta in January winter -- and spent pent-up money. In April, Nanook North (and Susie Southeast) reverted to the mean.
Look at the moving average of consumer spending and April spending was still 1.8% above the average of January through March, says Regions Financial chief economist Richard Moody. So don't make too much of the dip, he argues.
2. The drop is in a couple of categories that still look fine overall.
The simplest reason to discount today's news is the entire $8.1 billion drop can be attributed to lower spending on heat and utilities, which helped drive the modest gains in frigid December and January. Lower spending on autos, which dipped in February and surged in March, were another factor in the drop.
No one is going to stop heating their house -- they simply spent less in April because it wasn't as cold. Autos are still looking on track for 16-plus million unit sales in the U.S. this year, and nothing about today's news changed that.
3. It's not consistent with most other data.
The job market took off in April, with employers adding 288,000 workers. The four-week average of jobless claims are running at a seven-year low, indicating few workers have much reason to fear being laid off. Even the numbers of people who are working part-time for economic reasons has dropped by about 300,000 this year to 7.5 million, by Labor Department estimates. More people with jobs rarely means a consumer-spending drop, let alone one that persists.
Joel Naroff, president of Naroff Economic Advisors, and Moody think consumer spending is behaving about as it did in the first quarter overall -- when the government says it rose at a 3.1% annual rate. That's a little below where it should be to get a really rapid acceleration in the whole economy, Naroff argues. But not a sign of trouble.
"It was disappointing to see that consumers are not flocking back into the stores," Naroff said. "But don't think spending this quarter will be weak."
The real issue is whether the job market will improve enough to keep consumer spending growing. Naroff, normally one of most-bullish top economists, is wary of a pickup in personal income that is slower than he has expected and thinks the economy may need more help from higher wages -- a point Federal Reserve Chair Janet Yellen has also made. But Moody says the job market is tightening and will tighten more this year.
It had better. As argued here Thursday, business investment is what really has to pick up if overall growth is to hit 3% this year -- a level that would drive unemployment well under 6% from 6.3% in April. But if the long, slow recovery has taught us anything, it's that U.S. business isn't going to spend for new products until it's 100% clear consumers will buy them.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.