5 Top Ranked Stocks To Buy As Consumer Spending Expands

In a clear departure from previous months, data released on Thursday revealed that consumers had quickened spending substantially during the month of April. The recently released GDP report had underlined the economy’s problems during the first three months of the year. Given this backdrop, a pickup in consumer spending indicates that the economy has emerged from its first quarter chill and is ready to turn the corner.

During the previous month, all of the major expenditure categories experienced moderate to strong expansions. Shrinking supply in the labor market and subsequent wage gains is believed to be the reason behind these gains which makes it a great time to invest in consumer discretionary stocks.

Pace of Spending Hits 4-Month High

According to the Department of Commerce, consumer expenditure increased by 0.4% in April, in line with estimates. This was an improvement over the upwardly revised pace of 0.3% for the month of March. More importantly, it is the fastest pace of growth recorded since Dec 2016.

This notable increase in personal expenditure was accompanied by an even sharper increase in incomes. Personal income increased by 0.4% in April, twice as much as the 0.2% increase in March. Even as both expenditure and income increased last month, the savings rate remained flat at 5.3%. This metric has now remained unchanged for a third month in a row.

Tight Labor Market, Wage Gains Powering Gains

Economists across the board believe that the rise in spending is an outcome of a tightening labor market. This in turn has led to wage gains, which has boosted purchasing power significantly. Further evidence of an improving labor market was received from recently released initial claims data. Though jobless claims increased by 1,000 during the week ended May 20, the four week average declined to its lowest level in 44 years.

Meanwhile, the consumer confidence index declined from 119.4 in April to 117.9 in May. However, the survey’s labor market differential registered the second best reading in 16 years. This metric is derived using data from respondents who believe jobs are in abundance and those who think they are tough to secure.

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