INCOME, SPENDING & CONFIDENCE: QUICK THOUGHTS

Takeaway: Spending outpaced Income as the decline in Saving supported services and nondurables consumption. Gov't sourced income inflecting positively

 

SPENDING:  Spending grew at a premium to incomes for a third consecutive month as the savings rate fell -40bps sequentially to 3.9%, the lowest level in a year.  

 

With the savings rate now back to the low end of the historical range, the capacity for Incremental savings depletion to support further improvements in consumption growth appears largely constrained. 

 

Household expenditure growth on Services and NonDurables accelerated, while spending on Durables – the 2013 leader as sales on higher ticket items improved – decelerated 300bps and 120bps on a 1Y and 2Y basis, respectively.  Whether the nascent deceleration in Durables represents a pull-back in spending across the higher income brackets remains TBD.    

 

INCOME:  Personal income growth, Disposable Personal Income (DPI) Growth, and Real DPI per capita all decelerated on both a 1Y and 2Y basis. 

 

Note that the December comp dynamics were impacted by the conspicuous pull-forward in compensation that occurred at year-end last year ahead of the fiscal cliff resolution and impending tax law changes.  Given the comp distortion, the 2Y comp offers the cleanest read for December and on that basis growth decelerated a moderate 20bps sequentially from +3.8% to +3.6% (vs. the reported -0.8% on a YoY basis).

 

Salaries & Wages:  Private sector salaries & wages slowed modestly in December while the slope of the broader trend remains positive at ~5% YoY on a 2Y basis.   

 

The other notable dynamic is that government sourced salary and wage income is inflecting positive for the first time in years. 

 

State & local government employment was positive for the 5th consecutive month in December (after 4 years of negative growth) and the ebbing of the fiscal drag alongside the spending friendly budget deal has aggregate incomes for government workers - which represent ~17% of labor force and ~17% of aggregate wage/salary income – beginning to show some positive mojo.

 

INFLATION:  PCE and Core PCE inflation both a little firmer sequentially, but still well below target.   The longer we mark time sub-target the more worrying it becomes for policy makers.  Expect speculation around an “inflation floor” to pick up as the Yellen transition matures.

 

INCOME, SPENDING & CONFIDENCE: QUICK THOUGHTS - Personal Income 2

 

INCOME, SPENDING & CONFIDENCE: QUICK THOUGHTS - Income   Spending Table Dec

 

 

CONFIDENCE:  This morning’s final estimate of confidence from the Univ. of Michigan capped the January data on consumer sentiment.  Across the primary survey’s, the results were mixed on a Mom basis with the Conference Board estimate advancing 3.2 pts while the Univ. of Michigan and Bloomberg readings declined a modest 1.3 and 1.1 points, respectively. 

 

The middling confidence numbers make sense in the context of the quantitative setup for the $USD and the TTM relationship between sentiment and the currency.  The dollar is currently neutral on a TRADE basis from a quant perspective and searching for some direction as it flirts with a breakout above the 81.12 TREND line.

 

INCOME, SPENDING & CONFIDENCE: QUICK THOUGHTS - Dollar vs Confidence

 

INCOME, SPENDING & CONFIDENCE: QUICK THOUGHTS - Confidence Table Jan 

 

 

Christian B. Drake

c

@HedgeyeUSA


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more