{"id":1540,"date":"2019-05-31T10:47:36","date_gmt":"2019-05-31T14:47:36","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1540"},"modified":"2019-05-31T10:47:36","modified_gmt":"2019-05-31T14:47:36","slug":"april-spending-and-income-and-may-consumer-sentiment","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1540","title":{"rendered":"April Spending and Income and May Consumer Sentiment"},"content":{"rendered":"\n

KEY DATA:<\/strong> Consumption: +0.3%;\nInflation-Adjusted: 0%; Income: 0.5%; Real Disposable Income: +0.1%; Inflation:\n+0.3%; Excluding Food and Energy: +0.2%\/ Sentiment: +2.8 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cIt\u2019s nice that income gains were strong, but\nit would be a lot better if more of the rise came from wages increases.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The consumer remains the key to continued\nsolid economic growth.  Do households\nhave the wherewithal to keep spending? \nNot as much as you might think.  Personal\nincome soared in April, which was the good news.  The disappointing news was that wage and\nsalary gains were not the driving force. \n<\/em><\/strong>Yes, they were up decently, but it was a surge in interest income\nthat created the jump in personal income.<\/em><\/strong>  It is not clear that consumers will be\nspending the interest surge or even how that rise was created.  As for consumption, a improving spending on\nnondurable goods demand offset the disappointing drop in vehicle purchases. <\/em><\/strong> Adjusting for inflation, consumer spending\nwas flat.<\/em><\/strong>  Still, given the\nenormous surge in demand in March, consumption looks on track to grow by at\nleast two percent this quarter.  That may\nbe the only thing that keeps the second quarter GDP number from being truly\nbad.  Speaking of inflation, the\nheadline and core (excluding food and energy) numbers ran a bit hotter than\nthey had been.  Over the year, though,\nboth measures remain in the 1.5% range, which is well below the Fed\u2019s 2%\ntarget.<\/em><\/strong>  As long as inflation\nremains in check, the tepid rise in wages should be enough to keep spending\nup.  And the rising savings rate means\nthat households have some insurance if the economy falters.  <\/em><\/strong><\/p>\n\n\n\n

On the consumer confidence front, households remain\nexuberant.  The University of Michigan\u2019s\nMay Consumer Sentiment Index rose from the April reading but was down from the\nmid-month number.<\/em><\/strong>  The outlook for future growth\nrose sharply even as the view of current conditions faded a\ntouch.<\/em><\/strong>  How the future growth\nnumber will react to the introduction of tariffs on Mexico will be interesting\nto see. MARKETS AND FED POLICY IMPLICATIONS:<\/strong>Headline numbers often mislead and the large\ngain in top line income growth was not indicative of what most workers are\nseeing.  Wage and salaries are what they\nwatch and while compensation is growing decently, the percent change over the\nyear has been steadily decelerating since August 2017.<\/em><\/strong>  The inflation-adjusted rise has been below 2%\nfor the past year and that makes it awfully hard to sustain 3% overall\ngrowth.  The good news is that confidence\nhas remained incredibly high.  The strong\njob market is driving that optimism but the view of current conditions may be\non the downslide.<\/em><\/strong>  Over the year,\nMichigan\u2019s current conditions index is now off. \nA key number for second quarter consumption is May vehicle sales, which\ncomes out next week. If we don\u2019t see a major rebound from the April collapse,\nsecond quarter growth will likely be weaker than most economists had been\nexpecting.  And then there is the\nannouncement of tariffs on Mexican products. \nThis has to raise questions about not only the US-Mexico-Canada\nagreement but also the likelihood of an agreement with China.  If having an agreement doesn\u2019t stop the U.S.\nfrom imposing tariffs on a country\u2019s goods, why have an agreement at all?  Tariffs are now viewed by this administration\nas a cudgel to secure actions from other countries that may or may not have\nanything to do with fair trade practices.<\/em><\/strong>  That cannot be good news for investors who\nnow have to worry not only when, but if a China-U.S. agreement will occur.  In addition, rising consumer and business\ncosts due to tariffs on both Chinese and Mexican products can only slow growth\nfurther.   We have entered a period of major\nuncertainties and that cannot be good for the markets, which were already\nreeling from the Chinese trade war.  Can\nwe really fight two trade wars at the same time?  We shall see. <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Consumption: +0.3%; Inflation-Adjusted: 0%; Income: 0.5%; Real Disposable Income: +0.1%; Inflation: +0.3%; Excluding Food and Energy: +0.2%\/ Sentiment: +2.8 points IN A NUTSHELL:  \u201cIt\u2019s nice that income gains were strong, but it would be a lot better if more of the rise came from wages increases.\u201d WHAT IT MEANS:  The consumer remains the … Continue reading April Spending and Income and May Consumer Sentiment<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1540","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1540","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1540"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1540\/revisions"}],"predecessor-version":[{"id":1541,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1540\/revisions\/1541"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1540"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1540"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1540"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}