Positive Consumer Data Driving the Market

Positive Consumer Data Driving the Market


US consumer spending surged 0.9% in March, the biggest gainer in about 10 years, as inflation pressures remain non-existent.

The March gain was the biggest monthly increase since August 2009, the Commerce Department reported Monday. That is a big improvement after 3 months of lackluster readings in this Key segment of the economy. Consumer spending accounts for over 70% of economic activity.

Incomes grew 0.1% in March while inflation rose just 0.2% and has risen only 1.5% over the past 12 months, far below the Fed 2% target for inflation.

The spike in consumer spending is encouraging because it suggests that the overall economy had solid momentum going into Q-2.

The government reported Friday that the economy, as measured by the gross domestic product, grew at a surprisingly strong 3.2%, helped by the March surge in consumer spending.

The 0.9% March spike in spending followed a sharp 0.6% drop in December and small gains of 0.3% in January and 0.1% in February. The slight 0.1% rise in incomes in March followed a modest 0.2% rise in February and a 0.1% decline in January.

With the big rise in spending and the increase in incomes, the household saving rate fell to 6.5% of after-tax income in March, the lowest level since November when it was 6.2%.

The 1.5% Y-Y increase in consumer prices was up from a 1.3% 12-month gain in February but still well below the Fed’s target.

The absence of inflation pressures was a Key reason that the Fed did an about-face in January, and announced that after boosting its benchmark interest rate 4X in Y 2018, it planned to be “patient” and expected that it would not raise rates at all in Y 2019.

That change has helped drive a big rally in the stock market as investors stopped worrying that the Fed was in danger of over-doing its credit tightening campaign and might drive the economy into a recession.

The Trump Policies are working.

Making and Keeping America Great!

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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