Stocks Surge on Consumer Spending

Posted by Louis Navellier on 5/1/08 10:45 am

Stock prices got a bump from personal income data this morning when they revealed that consumer spending, or personal consumption expenditures (PCE), rose 0.4% in March, double the 0.2% consensus.  Real consumer spending, or real PCE, (spending minus inflation) increased just 0.1%, but that was better than the 0.1% drop in February.

As a result, economists were encouraged by the fact that these data indicate the economy is not falling off a cliff.  However, Ian Shepherdson at High Frequency Economics remains skeptical about consumers.

“Overall, the trend in spending growth has slowed markedly, and remember that the full impact of the recent plunge in [consumer] confidence is yet to be felt.  We expect [consumer] spending to fall in Q2.”

I’m not convinced consumer spending is about to rebound either, at least not significantly.  Watch my Video.  No doubt a lot is riding on the tax rebate checks.  If consumers use them to pay down debt and/or deposit them in savings accounts, spending will unquestionably suffer.  BUT, we Americans love to shop, especially when the weather is nice.  As such, it wouldn’t be a shocker at all if spending upticks as a result of the government’s stimulus package, especially if oil prices continue to fall like they have during the past few days.

Still, you have to wonder how temporary the government checks will be.  After all, housing prices are still trying to find a bottom, food costs have gone through the roof, and we’re nearing the summer driving season, a time when gasoline prices typically increase. Listen to NPR Summer Driving Season Clip.

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