The week in review
- Consumer confidence fell to 67.4 in May.
The week ahead
- CPI
- PPI
- Retail sales
- Housing starts
Thought of the Week
Despite weak income growth in early 2024, consumer spending remained resilient, and real wages stayed positive. The personal saving rate, however, slid to 3.6% for the quarter and 3.2% in March, lower than for any year since 2007. This may seem concerning, but it's important to note that the personal saving rate, calculated as the residual of disposable personal income less personal outlays, is inherently volatile.
This week’s chart, which shows the personal saving rate from 1978 to today, reveals that consumers’ unwavering spending habits over the past few years have pushed the personal saving rate well below its long-term average of 8.5%. In 2020 and 2021, pandemic aid boosted personal savings, allowing consumers to spend cash accumulated from the government without drawing down on existing savings. While this tailwind persisted into 2022, it began to fade in 2023. Consumers had to adapt and began accumulating credit card debt, which has now risen above pre-pandemic levels. This suggests that consumers might finally be ready to pause their spending.
However, it is worth noting that wage gains have outpaced inflation for over a year, and household wealth rose by 8% in 2023. Consumer sentiment remains positive. Despite a possibly overstated 12.7% month-over-month drop in early May, it's up 14.2% year-over-year, standing 17.4 index points above its low of 50 in June 2022. Consequently, the saving rate will likely stay low as consumers continue to find ways to keep the spending party going.
Chart of the Week: Source: FactSet, BEA, J.P. Morgan Asset
Management.
Thought of the week: Source: FactSet, University of Michigan, J.P.
Morgan Asset Management.
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Originally Posted May 13, 2024 – Weekly Market Recap
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