2. Consumer Economic Trends – September 2016
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Summary
• The U.S. economy failed to gain momentum in 2Q as falling investment was not
offset by strong consumer spending. Also, the poor reading for the August ISM
manufacturing index combined with disappointing productivity result indicates
that the economy is not poised for a quick turnaround. Uncertainty over the
election and world affairs in general is restraining business investment which
will further slow growth
• During July disposable income was up 0.4%, but average weekly earnings
declined 0.2% in August
• Consumer spending was up 0.3% in July but retail sales were unchanged from
June. Gasoline station sales are still a significate drag on sales growth
• August job gains were modest at 151,000; a significant drop from the strong
readings of 271,000 and 275,000 in June and July. The broader employment
ratios show slight improvement in August
• Consumers revolving debt continued to increase up a brisk 5.4% in June.
However, the debt to income ratio remained stable and below 7%
• Consumer sentiment slipped 0.2 to 89.8. Consumer concerns centered on
slow income gains amid rising expenses
• Small business optimism edged up 0.1 in July, but is still well below its post
recession high
List of Charts
1. Disposable income
2. Consumer spending
3. Retail sales
4. Ecommerce sales
5. Jobs growth vs. UI claims
6. Employment ratios
7. Wage growth vs. inflation
8. Revolving credit
9. Purchase volume
10. Consumer sentiment
11. Small business optimism
3. Annual disposable personal income growth increased to 4.4% in July. The savings rate ticked up to
5.7%. Since the beginning of ‘14, disposable personal income has grown at a 4.3% annual rate
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17.0%
17.5%
18.0%
18.5%
19.0%
19.5%
20.0%
20.5%
21.0%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Personal Income and Savings
Disposable Personal Income Y/Y Growth% Personal Savings Rate % Tax Burden % Personal Income (right scale)
Source: Bureau of Economic Analysis
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4. Consumer spending grew strongly in 2Q partially offsetting the very weak investment result. During
July spending increased only 0.3% and year-over-year growth was 3.9%. Energy continues to have a
negative effect on spending
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-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
'11 '12 '13 '14 '15 '16
Nominal Consumer Spending Growth Y/Y%
Total Consumer
Spending
Durable Goods
Nondurable Goods
Services
Nondurable Goods
ex. Energy
Source: Bureau of Economic Analysis
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5. Retail sales were flat in July and year-over-year growth fell to 2.3% as Q3 consumer spending got off
to a slow start. Gasoline station sales declined 2.7% in July. The decline in gasoline station year-
over-year sales remained worse than -10%
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-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
'11 '12 '13 '14 '15 '16
Retail Sales Growth Y/Y%
Total Retail Sales Excluding Autos Ex. Autos & Gasoline Stations Gasoline Stations (right scale)
Source: Census Bureau
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6. During the last four quarters e-commerce contributed over 60% of retail sales growth…
falling gasoline sales has accelerated e-commerce’s growth impact
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-45%
-30%
-15%
0%
15%
30%
45%
60%
75%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
E-Commerce Sales Growth Y/Y%
Note: This chart is updated quarterly
Total Retail Sales E-commerce Total ex. E-commerce E-commerce Overall Growth Contribution 4Q Average (right scale)
Source: Census Bureau
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7. August jobs gains (151K) were significantly below June’s and July’s strong numbers. The 3Q average
was a solid 232K. The 12 month average job gains (204K) remaind slightly over 200K. Initial claims
remain historically low. But revised 2Q labor productivity was down 0.6%
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250
280
310
340
370
400
430
460
490
520
550
580
610
640
670
700-900
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
500
600
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Monthly Employment Gains vs. Unemployment Claims (Thousands)
Monthly Payroll Employment Gains 4 Week Moving Average Unemployment Claims (right scale inverted)
Source: Bureau of Labor Statistics
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8. The broader employment ratios stabilized in early 3Q after Q2’s decline. But ’16 has been
unable to sustain the positive trend in the employment-population ratio seen during ‘14-’15
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1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
57%
58%
59%
60%
61%
62%
63%
64%
65%
66%
67%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Employment Ratios
Labor Force Participation Rate Employment-Population Ratio Unemployment Rate (right scale)
Source: Bureau of Labor Statistics
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9. Wage growth was up only 0.3% in August after a strong 0.8% gain in July. Y/Y growth
declined to 2.4% from 2.7% in July which was the post recession high
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-1%
0%
1%
2%
3%
4%
'10 '11 '12 '13 '14 '15 '16
Wage Growth vs. Inflation
Average Hourly Earnings Y/Y Growth CPI Y/Y % Change Core CPI Y/Y % Change
Source: Bureau of Labor Statistics
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10. Revolving credit growth has accelerated since early ‘14; however, as a percentage of
disposable income revolving credit has remain stable at ~2ppt below its pre-recession level
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-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
$800
$825
$850
$875
$900
$925
$950
$975
$1,000
$1,025
$1,050
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Consumer Revolving Credit
Consumer
Revolving
Credit
Outstanding
Consumer
Revolving
Credit Y/Y%
Growth (right
scale)
Consumer
Revolving
Credit as a % of
Disposible
Personal
Income (right
scale)
Source: Federal Reserve, Bureau of Economic Analysis
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Billions
12. The Consumer Sentiment index continues to hover around 90 as consumers move from
one concern to another
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-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
40
50
60
70
80
90
100
110
120
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Consumer Sentiment
University of Michigan Consumer Sentiment Y/Y% Change (right scale)
Source: University of Michigan
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13. Small business optimism index ticked up 0.1 in July. The fourth consecutive monthly gain. The six
month moving average stopped its slide plateauing at 93.7. However, the index remains well below its
post recession high of 100.4 reached in Dec. ‘14
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80
85
90
95
100
105
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Small Business Optimism
NFIB Small Business Optimism Index 6 Month Moving Average
Source: National Federation of Independent Business
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