Monday morning's report on personal income and spending was something of a shocker. And while it didn't hurt equity futures at the time, it was a mixed bag, which speaks to the consumer’s state of mind.
Personal Income was up 0.3%, better than 0.2% consensus, but spending plunged 0.3%, worse than expected, as savings surged to 4.9% from 4.3%.
The US Daily Consumer Spending report was corroborated by a survey from Gallup, showing a sharp decline in average spending; it’s not atypical for a decline between December and January, but it is alarming nonetheless. Spending dropped to $81 daily from $98, though still better than $78 last January.
So, the question is what's going on... why is Main Street so afraid? I asked this on Twitter and on my show, Making Money with Charles Payne (Fox Business), and the replies included:
- Poor jobs picture
- Lackluster wages
- Worries that gas prices will snapback
Without a doubt, gas will move back to new highs in the future, but it's unlikely to happen any time soon or even this year. From an investment point of view, I think oil might have to retest recent lows, but not oil stocks. As for consumer anxiety regarding a rebound, it will fade over time, but it's no guarantee it will cause a spike in spending. In fact, job quality and pay must increase for that to happen.
