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Afternoon Note

Consumer (Cautiously) Stepping Up

By Charles Payne, CEO & Principal Analyst
8/31/2017 2:10 PM
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This morning, we learned personal spending didn’t keep pace with income, as consumers continue to spend in a more guarder manner. Keep in mind, the June spending number was revised to +0.2% from unchanged, so there is a chance the final July number might express greater confidence from consumers.

PCE data showed a $29.3 billion increase in spending:

As private sector wage increases continue to drive overall income, at some point, gains for spending should outpace.

Savings Dilemma

With the Reserve holding interest rates near zero, there is very little incentive to save money – which is their goal. The savings rate has declined dramatically this year, and while it’s a sign of confidence, it raises yellow, even red flags, as well. Back in the day, so many Americans had exposure to the stock market that low savings rates weren’t considered a big deal.

Now, fewer folks are in the market, and yet, savings rate continues to drift lower.

For now, I’m okay with the lower levels if wages continue to improve. The consumer is 2/3 of the economy, and they must step up along with business investment to put this economic rebound in overdrive.

For the remainder of the session, it looks like angst is setting in ahead of tomorrow’s jobs report.  It’s a big one, and against the backdrop of sell first and ask questions later, so it must be stronger than expected. All the dots connect to a solid report that will buttress the fundamental proposition of this rally, even if the initial reaction is all emotions.


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