According to the U.S. Department of Commerce, personal income for the month of July rose only 0.1% month over month, down from a 0.3% rise in June. Consumer spending rose only 0.1% in July from the preceding month. (Source: “Personal income and outlays, July 2013,” Bureau of Economic Analysis web site, August 30, 2013.)
Consumer spending saw a reported 0.6% increase in June from the previous month, so this 0.1% increase in July is a sign that the average American is pulling back on consumption. Even though we’ve seen relatively stable housing and automobile data, it’s quite evident that consumer spending is vulnerable.
As most of you know, consumer spending is approximately 70% of the U.S. economy. As I’ve mentioned before, without a re-acceleration in spending, the U.S. economy also cannot improve.
Frankly, July’s level of consumer spending is not a shock to me, as I’ve noted before that the underlying fundamentals of the U.S. economy are quite fragile.
It is true that both housing and the automotive sectors are doing well. However, this has been brought on through the low-interest-rate environment, not through increased levels of income.
Because incomes are not rising, Americans who are buying big-ticket items are doing so on credit, using the cheap interest rates to finance their consumer spending purchases. However, for the U.S. economy to really accelerate, we need far more participation from all sectors, not just the interest rate-sensitive segments.
Chart courtesy of www.StockCharts.com
Above is a chart for the SPDR S&P Retail Index (NYSEARCA:XRT) exchange-traded fund (ETF). It has essentially doubled over the past few years.
When we look at the recent data regarding consumer spending and the relatively anemic U.S. economy, and combine that with retail stocks that have done so well over the past couple of years, there’s just one question: what’s left for the stocks?(...)Click here to continue reading the original ETFDailyNews.com article: What’s Holding Back The Retail Index ETF?You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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