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Spending And Income Growth Disappoints as NASDAQ Rises Above 5,000
Andre Sealy: We’re often reminded how this ‘jobless’ recovery suddenly transformed into a ‘jobs-lead’ recovery. The only problem is that more jobs are the only byproduct we have from this economic expansion. The idea was that income growth and spending was supposed to soon follow, but there seems very little evidence of that actually happening.
Personal Incomes for the month of January increased 0.3%, lower than the 0.4% initially expected by market consensus. In addition to the lower than expected growth, the previous month of December was also revised downward to 0.3%. This completely wiped out any momentum achieved within the prior months (Sept and Oct achieved income growth of 0.4%).
Well, lack luster growth isn’t all that bad as long as we have falling oil prices, correct? For the third month in a row, consumers lack the incentive to spend the extra savings from lower prices at the pump. Personal Consumption Expenditures (PCE) fell for the second month in a two at 0.2%, after falling 0.3% the previous year. As most analyst assumed (wrongly) that much of the savings would end up in areas of the economy, I seem to recall saying that the exact opposite would happen.
Instead, these extra savings seem to be ending up in the bank accounts rather than inside the registers at other local shops and retailers. The personal savings rate increased to its highest level since December 2011.
Although its been 6 years, the aftermath of the financial crisis is still fresh in the minds of many individuals. Considering this, consumers are reluctant to spend. Not because they anticipate lower prices (as many inflationist assumes that is what occurs when prices fall), but are rather conflicted with much economic uncertainty.
However, the strength of the American economy is always certain when you have shares in the American stock market. Amidst all the disappointing economic data we received this morning, the NASDAQ have breached the 5,000 point threshold and closed above that level for the first time since 2000. Who really cares if manufacturing output is slowing, construction spending dropping, income growth being lackluster and consumers refusing to spend in our consumer spending driven economy? The NASDAQ is back! Happy days are here again!
Mission accomplished. The wealth effect is maintained.
So what do you think?
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This article is brought to you courtesy of Andre Sealy.
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Source: http://marketdailynews.com/2015/03/03/spending-and-income-growth-disappoints-as-nasdaq-rises-above-5000/
