LOS ANGELES—Consumer spending is nearing peak levels, according to John Chang, FVP of research services at Marcus & Millichap. Chang gave an economic update on a recent Marcus & Millichap web series roundtable about the office and industrial markets, explaining that while the oil market has essentially collapsed, the savings in gas is a positive for consumers.
“I want to highlight that consumer confidence is pushing back toward where it was at the prior peak,” said Chang on the panel. “We are really just slightly below the height of consumer confidence just before the recession, and that is a real positive driver of the economy.”
The decline in gas prices is saving the average driver $500 to $600 per month, but consumers aren't spending their gas savings. “A lot of the money has gone into savings, and the savings rate is up to about 5.5%. That is the strongest we have seen it since the 90s,” adds Chang. “We haven't seen it roll into consumption at the levels that we would have anticipated. It is really important to for the Americans to develop a savings because that really supports their long term outlook and growth.”
Chang, however, couldn't deny the economic anxiety or fear of another recession, especially considering the stark drop in oil prices, which he admits puts additional strain on the economy, or the global economic volatility. However, he sees strong fundamentals and growth ahead, not a recession. “When you look back at this growth cycle, which has extended for 78 months, it has a real choppy formation. There are three or four quarters where it is quite strong and then a slow growth cycle,” says Chang. “There fourth quarter of last year is an example of that. As we look forward into the coming year, we think the growth rate is going to stay around 2% to 2.5% growth in 2016. We still have a lot of strong fundamentals supporting that, and even though this growth cycle has extended beyond the long-term average, which is 60 months, there are recovery and growth cycles that extend as long as 10 years. Although we are longer than average, we still potentially have a long way to go as this cycle develops.”
LOS ANGELES—Consumer spending is nearing peak levels, according to John Chang, FVP of research services at Marcus & Millichap. Chang gave an economic update on a recent Marcus & Millichap web series roundtable about the office and industrial markets, explaining that while the oil market has essentially collapsed, the savings in gas is a positive for consumers.
“I want to highlight that consumer confidence is pushing back toward where it was at the prior peak,” said Chang on the panel. “We are really just slightly below the height of consumer confidence just before the recession, and that is a real positive driver of the economy.”
The decline in gas prices is saving the average driver $500 to $600 per month, but consumers aren't spending their gas savings. “A lot of the money has gone into savings, and the savings rate is up to about 5.5%. That is the strongest we have seen it since the 90s,” adds Chang. “We haven't seen it roll into consumption at the levels that we would have anticipated. It is really important to for the Americans to develop a savings because that really supports their long term outlook and growth.”
Chang, however, couldn't deny the economic anxiety or fear of another recession, especially considering the stark drop in oil prices, which he admits puts additional strain on the economy, or the global economic volatility. However, he sees strong fundamentals and growth ahead, not a recession. “When you look back at this growth cycle, which has extended for 78 months, it has a real choppy formation. There are three or four quarters where it is quite strong and then a slow growth cycle,” says Chang. “There fourth quarter of last year is an example of that. As we look forward into the coming year, we think the growth rate is going to stay around 2% to 2.5% growth in 2016. We still have a lot of strong fundamentals supporting that, and even though this growth cycle has extended beyond the long-term average, which is 60 months, there are recovery and growth cycles that extend as long as 10 years. Although we are longer than average, we still potentially have a long way to go as this cycle develops.”
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