This Is What Americans Spent The Most Money On In The First Quarter

As noted earlier, it was a stronger than expected quarter for the US, in which US households reportedly spent far more than initially estimated, with Real Consumer Spending rising 1.1%, above the 0.6% expected, and contributing 0.75% to the bottom line annualized growth, or just over half the 1.4% GDP print. As Citi commented after the GDP data, "The market didn’t expect this much of a positive revision in the Q1 GDP print; in fact, it didn’t expect a revision at all. We zoom in on the personal consumption print, which has seen an uptick of 0.5% to 1.1%."

So, as we always do, we decided to take a look at what Americans spent the most money on in Q1, to find what the source of this unexpected spending splurge.

Here traditionally we expect healthcare (i.e., the Obamacare tax) to provide the bulk of the upside, but in Q1 we found only a modest contribution, with a spending increase of only $11.2 billion compared to Q4. Additionally, we found that in the quarter American spending actually declined on such staples as housing and utilities, clothing and footwear, gasoline (to be expected with dropping gas prices) and, perhaps the biggest surprise, motor vehicles and parts, which declined by a whopping $17.5 billion annualized: a bright red flag over the US auto industry.

So what jumped? Well, as was the case in the first GDP estimate, for some inexplicable reason, in the first quarter American consumer were scrambling to buy... recreational vehicles!?

Incidentally, this won't be the first time Americans splurged on RVs. The last time they did this? Exactly one year ago.

To be sure, the ongoing surge in RV purchases sure would explain why the housing recovery, overdue by about 5 years, still fails to materialize.

And another observation: if it wasn't for the inexplicable splure on RVs, GDP would have grown by one third less, or less than 1%.

Courtesy of a reader writing in, we may have an explanation:

Some tiny house manufacturers have deliberately got themselves classified as RV manufacturers, so that buyers can secure RV loans to help them get the money together to buy a tiny house. One company doing this is Tumbleweed Tiny Houses, who will be reclassifying its tiny houses as trailers in February.


One company offering this kind of loan is Rock Solid Funding, which provides trailer financing and loans for RVs, boats, and motorcycles.


This solution isn't perfect though, as RV loans are not designed for primary residences. To secure this kind of loan, you're likely to need a steady income, good credit, and somewhere else that you can call your primary residence.


These loans generally come with higher interest rates and taxes. Loans are typically for between seven and fifteen years, with a monthly payment of between $500 and $1000, an interest rate of 4-7%, and a downpayment of about 20%.


Tumbleweed suggests getting approved by a credit union before approaching them about buying a tiny house using an RV loan. They also recommend asking for more money than you think you'll need, partly because they might offer you less than you ask for and partly because you might want to factor in additional costs, such as shipping.

So it may be indeed a housing recovery... only one for tiny houses.