Amidst all of the angst and worry over the volatility in the financial markets, the engine for growth in the U.S. economy (consumer spending) continues to quietly provide strength amongst other areas of weakness. As I have discussed in the past, the U.S. equity markets do not necessarily reflect the health of the U.S. economy. In the past, the view was that the equity markets led the economy by 6-9 months. With equity markets being distorted by world central bank quantitative easing programs, that link has clearly been broken.
Therefore, focusing on economic data is how to best gauge current and future economic growth. Since consumer spending still accounts for close to 70% of U.S. economic growth, that is where to focus when seeking signs of how the U.S. economy is faring.
The Census Bureau released details on Retail Sales for the month of January and the results show solid spending from the consumer. Retail Sales is one component of consumer spending and, in general, would be the indicator to gauge discretionary spending (i.e. things you want to buy). Retail Sales grew 3.4% on a year-over-year basis. That was an improvement from the year-over-year growth of 2.4% in December and 1.5% in November.
The areas of retail sales that saw the biggest year-over-year declines were:
The areas with the biggest gains:
Consumer confidence surveys also have displayed remarkable resiliency in the midst of the worries over financial market turbulence. The consistent theme from the various consumer surveys is that consumers indicate a willingness to spend due to salary improvements and the savings from lower gas prices. If consumers continue to follow through on their confidence and February and March retail sales continue at a similar pace of growth, that would indicate U.S. GDP growth would continue in the 2-2.5% range.
Now for your Valentine’s Day trivia:
For those who live in Idaho you will like the results, but for those who live in Oregon, you might want to stop reading……
A survey done by Finder.com provided in the following results:
Valentine’s gifts appear to be more important for those newer in a relationship compared to those who are in a longer term relationship.
Apparently Valentine’s Day is designed for men to give and women to receive!
Now that you have had your Valentine’s trivia, enjoy your Valentine’s weekend.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.