Consumer data in the U.S. continues to make steady progress as improving labor market data supports incomes and confidence, which is helping spending. Personal income data increased by a record 21% month-over-month (m/m), driven by the newest fiscal stimulus benefits. Employee compensation (wages) increased by 1%, the most since August 2020. Proprietor’s income (business ownership) increased by 6.2%, the most since September 2020.
Spending data continued to improve as well, as Personal Consumption Expenditures (PCE) increased by 4% m/m. Goods continued to be the main driver of spending growth, but Services also increased by over 1% for the first time in several months. This is a positive sign that this segment of the economy is starting to rebound.
Spending has lagged the recovery in income, which has led to higher savings. The personal savings rate in March increased to 27%, which is the second highest on record. This should be a likely source of strong demand in the second half of 2021 as more of the economy becomes accessible and mobility continues to increase.
As a result of improving consumer financials and the expectation of a return to normal activity post vaccination, consumer confidence is improving. The weekly Langer Consumer Comfort Index increased for the sixth consecutive week to the highest level since March 2020.
The April Conference Board Consumer Confidence Index increased 12.7 points to 121. Most of the growth was driven by the present situation component, which increased by a record 29.5 points to the highest level since March 2020. The Expectations component also improved and the outlook for business conditions was the highest since July 1983.
The final April Reuters/University of Michigan Consumer Sentiment Index increased to the highest level since March 2020 as both conditions and expectations improved.
The increase in U.S. consumer data is another indication that economic growth continues to improve, which is a trend that we expect to continue to see in Q2 data. This should be supportive of economic and inflation sensitive assets and a headwind for defensive and duration sensitive assets.
Vice President, Research and Strategy
Boyd Watterson Asset Management, LLC
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