Market Commentary

The Consumer

Out this morning was the consumer income and spending numbers for August. These reports are monthly and though they look back one month they tell us what the consumer is actually doing with their money and how much they are making. The key to understanding these numbers is that we want rising numbers on both spending and income. If income is rising faster than spending, then the consumer is saving money. That can be a problem for the economy as our economy is driven by consumer spending which represents about 70% of all economic activity in the U.S.

For August, income rose.4% but spending only .1%. If this pattern continues it will show that the consumer is getting concerned and has ratcheted down spending. That usually means fear is creeping into the consumer spending habits. The consumer sentiment index and other reports about the consumer remain high, and went up, so it is doubtful that the consumer is closing his/her wallet. Recessions are usually born out of fear by the consumer. The catalyst for the fear can be anything but if they are working and spending a recession for the economy is not in the cards.

These are important numbers to watch for the serious investor.

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