Journal Article

Has durable goods spending become less sensitive to interest rates?

Abstract: Despite record-low interest rates, the pace of the current economic recovery has been only moderate. One reason is that the positive impact of lowered interest rates on consumer purchases of durable goods has diminished. Comparing the current economic recovery with those that followed the recessions of 1981-82, 1990-91 and 2001, Van Zandweghe and Braxton explore the way movements in key interest rates have affected consumer spending on durable goods. They find that if the boost from lowered interest rates to durable goods spending in the current recovery had stayed as strong as it was on average in previous recoveries, durable goods spending from the beginning of 2012 to midway through 2013 could have contributed almost half a percentage point more to the United States? quarterly GDP growth.

Keywords: personal consumption expenditures; Durable goods; Consumer spending; Interest rates;

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 2013

Issue: Q IV

Pages: 5-27