Consumer spending in May, reported today, grew at a fairly sluggish rate of 0.2%. This follows no gain in April and a 0.8% jump in March.
What’s the point? This economic recovery has been the most sluggish of any recovery since WW2. A couple of the key reasons for this are over-leveraged consumer balance sheets, tight credit, and slower growth in federal spending due to sequestration. This has manifested itself in slow pace of job creation and consumer spending well below previous economic recoveries. We believe consumer spending will improve modestly as job growth improves, however, given the still significant structural issues facing the U.S. economy, we expect consumer spending will remain below long-term trend growth for a considerable period. This has implications for stock valuations but as long as consumer spending remains positive, we don’t believe it would have an overly negative effect on stocks.
Link: http://finance.yahoo.com/news/consumer-spending-may-disappointingly-weak-134551664--finance.html