Consumers: Make More, Spend More

Last week was “risk-off” for stocks. This week, not so much.

Despite Boeing’s (NYSE: BA) 10% drop, initially pulling the Dow Jones down with it, stocks rebounded nicely on Monday and ended a five-day losing streak.

I’ve been saying volatility was going to rise, and last week it did across all sectors. But at this week’s open, that volatility has since backed off.

Most of what drove stocks lower over the past few months was doubt over the U.S. trade deal with China. And it doesn’t help that their economy has been slowing down.

We’re also seeing a slowdown in Europe. The uncertainty with Brexit is destabilizing. That uncertainty seems to be the only certainty, according to Britain’s Prime Minister Theresa May.

Economies in the major industrialized nations are naturally linked by trade. So, when one major economy falters, other major trading partners are likely to follow. It serves as an indicator to things to come. If China and Europe are already slowing, the U.S. economy is bound to slow as well.

In fact, we’re already seeing signs of slowing…

January Retail Sales…

The Census Bureau is still catching up on updating retail sales figures.

Consumer spending comprises nearly two-thirds of our economy and retail sales makes up half of all consumer spending. When spending slows, it stands to reason our economy will slow. Remember the horrific December sales report?

I’ll remind you that sales were reportedly down 1.2%. Headline sales were revised even lower in the latest report – down 1.6%. And when autos and gasoline were taken out, sales were adjusted lower from down 1.4% to 1.6%.

Some analysts, including myself, thought that the Census may have just gotten it wrong when they reported the dismal December sales and indeed they did! Only it wasn’t better than expected… it was worse.

So, Monday’s update of January retail sales was technically better than expected – up 0.2% on the expectation of a 0.1% increase. Excluding autos and gas, sales were up 1.2%, doubling the expected 0.6% rise.

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