{"id":1558,"date":"2019-06-28T11:03:11","date_gmt":"2019-06-28T15:03:11","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1558"},"modified":"2019-06-28T11:03:11","modified_gmt":"2019-06-28T15:03:11","slug":"may-spending-and-income-and-june-consumer-sentiment","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1558","title":{"rendered":"May Spending and Income and June Consumer Sentiment"},"content":{"rendered":"\n

KEY DATA:<\/strong> Consumption: +0.4%; Income:\n+0.5%; Prices: +0.2%; Ex-Food and Energy: +0.2%\/ Sentiment: -1.8 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cDecent income gains are supporting continued\nconsumer spending, but weakness in wage increases remains a threat to growth.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Until the trade wars are resolved, businesses\nwill remain under pressure, so we have to look at consumers to keep things\ngoing.  And it looks like that is\nhappening.  Household spending jumped in May,\nled by a surge in vehicle sales. \nServices demand also was up solidly, which overcame weakness in soft\ngoods purchases.<\/em><\/strong>  Still, the\nincrease in spending, when added to the rise in April, means that second\nquarter consumption should be solid if not strong. <\/em><\/strong> Of course, that depends upon June vehicle\nsales and we will not know them until next week.  Can households continue to spend?  That is a good question.  On the surface, the answer is yes, as\ndisposable (after tax) income rose strongly. \nBut wage and salary gains were tepid, at best.<\/em><\/strong>  Workers did not see a whole lot of increase\nin their paychecks and that is worrisome. \nProprietors\u2019 income jumped and interest payments surged (don\u2019t ask me\nwhy, I have no idea), creating the strong income increase.  The savings rate was up again, possibly\nindicating that households are becoming more conservative in their spending\npatterns.  As for inflation, it rose\nmoderately even when the volatile food and energy components (the core rate) were\nremoved. <\/em><\/strong> Over the year, price gains remain\nbelow the Fed\u2019s 2% target.<\/em><\/strong> <\/p>\n\n\n\n

Consumer confidence continues to fade, but by no\nmeans can it be said that people are depressed. \nThe University of Michigan\u2019s Consumer Sentiment Index eased in June less\nthan expected.  The overall measure\nremains quite high<\/em><\/strong> as do the current conditions and\nexpectations indices.  <\/em><\/strong>The report\nnoted that: \u201cJune’s small overall decline\nwas entirely due to households with incomes in the top third of the\ndistribution, who more frequently mentioned the negative impact of tariffs<\/em>\u201d.  That is not likely to lead to much of a\nchange in overall spending.MARKETS AND FED POLICY IMPLICATIONS:<\/strong>We\nare on Fed Watch.  Will the FOMC cut\nrates at the next meeting, that end July 31st? \n The markets still seem totally\nconvinced that it will happen, but I am not. \n<\/em><\/strong>Consumer spending is holding up and that means second\nquarter growth could come in at around 2%. \nThe Fed raised rates when the economy was expanding not much more than\n2%, so why should 2% growth require a rate cut?<\/em><\/strong>  Keep in mind, most economists believed and\nstill do that 3% growth is not sustainable and we would ease back to trend,\nwhich is in the 2% range.  As\nfor inflation, which seems to worry the Fed as much or more than growth, it too\nis not really falling apart.  On a\nquarter-over-quarter annualized basis, top line inflation is running at a 2.3%\nannualized pace while core inflation is more muted, at 1.7%.<\/em><\/strong>  While the year-over-year numbers are both\nbelow 2%, the Fed should also be looking at the recent pattern.  If the quarter-over-quarter rates are near\nthe Fed\u2019s target, wouldn\u2019t it be reasonable to remain patient and see what\nhappens?  Growth around 2% and inflation\njust below 2% are not data points that demand a rate cut.  <\/em><\/strong>If we get one, my conclusion would be\nthat it\u2019s the equity markets that matter the most right now.  That would imply the Fed has a triple mandate\nthat includes maximizing equity values, not just maximizing employment and\nstabilizing inflation.  Ugh!\n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Consumption: +0.4%; Income: +0.5%; Prices: +0.2%; Ex-Food and Energy: +0.2%\/ Sentiment: -1.8 points IN A NUTSHELL:  \u201cDecent income gains are supporting continued consumer spending, but weakness in wage increases remains a threat to growth.\u201d WHAT IT MEANS:  Until the trade wars are resolved, businesses will remain under pressure, so we have to look … Continue reading May Spending and Income and June 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":[3],"tags":[],"class_list":["post-1558","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1558","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=1558"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1558\/revisions"}],"predecessor-version":[{"id":1559,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1558\/revisions\/1559"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}