Why Consumer Spending is Down Despite Economic Upticks
Today’s issue of The Daily Reckoning finds a resurgent US stock market. Despite dipping – briefly – into the red for the year-to-date a couple weeks ago, the S&P 500 is closing out the first quarter with a gain of 6%! Despite the noteworthy stresses around the globe – and the considerable economic uncertainties here at home – the S&P sits less than one percent below its peak levels of the last two-and-a-half years.
So the stock market’s doing pretty darn well. The US consumer…not so much. The chart below, for example, looks nothing like the ascendant price chart of the S&P 500 Index.
Consumer spending, apart from spending on essentials like food and gasoline, is sluggish at best. A chart of disposable income, after taxes and inflation, would look equally dismal. In other words, despite some measurable upticks in economic activity, these upticks are failing to bear much fruit down at the level where real people earn and spend money. Inflation is chewing up almost all the statistical economic gains of the last several months.
Even though incomes are rising somewhat, inflation is rising just as quickly…which means that net wealth is going nowhere. Perhaps that’s why companies like Marriott International are posting disappointing earnings results. Earlier this week, Marriott disclosed that its “revenue per available room” (Revpar) will be lower than originally forecast, due to weakness in North American demand. International revenue remains “robust” however, according to Marriott.
Perhaps this “weakness in North America” is a one-off or perhaps it is a sign of things to come. Whatever the case, the contrast between the sluggish growth rates of the world’s Developed Markets and the robust growth rates of the world’s Emerging Markets is very real…and this contrast is becoming a staple of the global investment environment.