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May consumer data sluggish……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
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Consumer confidence improving….U.S. consumer confidence rose slightly in May and has
remained steady over the past six months in spite of weak first quarter GDP
growth. Improving job prospects were cited as the reason for the higher
confidence reading.
What’s the
point? Recent data indicate that the U.S.
consumer is feeling a little better about the economy but remains generally
cautious about finances, jobs, and spending. Confidence seems to be grudgingly
improving in a parallel with the job market. There remains a severe leverage
overhang in the consumer sector, which is acting as a drag on the consumer
spending recovery. We are of the belief that as the job market continues to
improve, consumer spending should also improve but not to the extent of prior
economic recoveries. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140627&id=17737035
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