Consumer spending accounts for 70% of economic activity in the U.S., and it jumped by 4.5% in South Carolina last year, according to new federal data. Meanwhile, inflation remained about the same.
The data is according to a pair of recent reports, one measuring wages in 2016 and the other breaking down consumer spending.
Despite recent gains, South Carolina still lags most of the nation in household income – it was ranked 43rd out of the 50 states last year – while its residents shelled out an above-average amount on goods and services.
In a report released Oct. 4, the U.S. Commerce Department’s Bureau of Economic Analysis said that consumer spending across the nation rose 4% last year, the same rate as 2015. But South Carolina outpaced the U.S. as a whole. Its "personal consumption expenditures" jumped about $7 billion, or 4.5%, to more than $165 billion, for a per-capita average of $33,266. Only Florida had a faster growth rate in the Southeast.
At the same time, the Palmetto State’s median household income climbed 4.8% to $49,501 in 2016, according to Census Bureau data released a few week ago. It was the biggest one-year jump in almost a decade.
South Carolina consumers spent more on housing, utilities and health care services last year. Those expenses were slightly offset by flat growth in off-premise food and beverages purchases and a double-digit drop in gasoline prices and other energy costs.
Economist Frank Hefner, director of the Office of Economic Analysis at the College of Charleston said with moderate inflation in some areas and gains in personal income mean the average person it South Carolina is spending 4.5% more. But is that good or bad? Hefner says the higher spending number is a good sign because consumer spending drives about two-thirds of economic activity.
A key reason is inflation, which has been hovering below 2% for years even as the economy has expanded, a pronounced trend that has bewildered the interest-rate arbiters at the Federal Reserve.
Economists say consumers are feeling confident with wages and incomes growing. Some of that reflects the tightening in the labor market in places like Charleston, Columbia and Greenville. But there is also improvement in the economy that is spreading beyond the large metro areas to more middle-size towns and even to many rural areas. In general, economists say the economy is improving on a fairly broad basis.”
The new South Carolina wage and personal spending figures come on the heels of a bullish revision to the U.S. gross domestic product, or the value of goods and services. The figure was upgraded to 3.1%, its fastest pace in more than two years.
The new data also follow yet another bullish federal report that found the economies of South Carolina's three major employment centers — Charleston, Columbia and the Greenville-Spartanburg area — expanded by an average of almost 3.4% in 2016.
Businesses, meanwhile, are spending more on machinery and other capital investments, a sign that for at least the short term, businesses are feeling optimistic.