Low-Income Earners Drive Consumer Sentiment Up for September

​Last week, data showed that retail spending declined in August, jobless claims rose for the week ending September 22nd, the personal consumption expenditures index hit the Fed’s targets, and consumer sentiment rose.

• U.S. consumers pulled back on retail spending in August, according to a report from the Commerce Department released last Friday. After climbing 0.4% in both June and July and 0.5% in April and May, household spending rose only 0.3% in August. Consumer expenditures, such as groceries and healthcare, is what drives the U.S. economy. The report also noted that Americans are saving less as well. The savings rate is down to 6.6% from 7.4% six months prior.

• For the week ending September 22, U.S. jobless claims rose unexpectedly, climbing 12,000 to a seasonally-adjusted 214,000. The week prior, jobless claims had fallen to a 49-year low. However, the effects of Hurricane Florence on the labor market are becoming apparent with flooding in the Carolinas leaving some temporarily without jobs. The claims report also showed the number of individuals receiving benefits after an initial week of aid rose 16,000 to 1.66 million.

• The core personal consumption expenditures (PCE) price index, which excludes volatile food and energy prices, rose only 0.1% in August 2018, leading to a 2% increase in prices for the last twelve months. The PCE index is a closely monitored marker by the Fed for inflation across the consumer market. The annual growth rate for the PCE in August is right in line with the Fed’s inflation target of 2% and validates the current Fed opinion that price pressures are under control in the economy.

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• Consumer sentiment rose in September, according to the University of Michigan’s Consumer Sentiment Survey. The rise to 100.1 from 96.2 in August was driven by sentiment gains among households in the bottom-third of incomes. Friday’s report noted that confidence for low-income Americans is the highest since 2000. However, sentiment among the top household earners has fallen about 8% over the course of the trailing seven months.