Consumers’ pay is rising, but they’re less willing to spend

Consumers are earning more, but they’re not spending much of that increased income and their confidence in the economy and their place in it is lower than it has been in months.

Consumers are earning more, but they’re not spending much of that increased income and their confidence in the economy and their place in it is lower than it has been in months.

We learned that and more last week amid a bevy of reports that came before and after the Federal Reserve’s Federal Open Market Committee decided Wednesday to leave interest rates alone — a decision the swirling new data supports.

Consumer sentiment, as measured by the University of Michigan’s Consumer Sentiment Index, fell to a seven-month low in April, dropping to 89 from 91 in March in a report the university issued Friday. That followed a dip in The Conference Board’s Consumer Confidence Index to 94.2 in April from a March reading of 96.1 in a report that came out Tuesday.

“The retreat from the 2015 [consumer confidence] peaks was evident across a wide range of expectations about prospects for the national economy,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “The size of the decline, while troublesome, is still far short of indicating an impending recession.”

“The decline is all the more remarkable, given that consumers’ assessments of current economic conditions, including their personal finances, have remained largely unchanged at very positive levels during the past year,” Curtin added. “This divergence may reflect the strength of the consumer, relative to the business sectors, and exacerbated by growing uncertainty about the economic policies advocated by various presidential candidates.”

Personal income rose 0.4 percent in March, more than economists expected, but consumer spending rose a less-than-expected 0.1 percent. Core inflation rose a helpfully low 0.1 percent, a development that Reuters said makes it less likely that the Fed will decide to raise interest rates twice more this year, as it has said it was expecting to do.

"The tone of these reports was quite weak, playing into the current narrative of weakening growth and the subdued inflationary momentum," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters. "We are expecting only one rate hike this year, with that move coming in September."

Last week, although the central bank left rates alone, it issued a careful statement that suggested a June move is something it could consider.

Lou Crandall, chief economist at Wrightson ICAP, told MarketWatch that the changes to the Fed’s statement from March to April “had an ever so slight hawkish tilt.”

“They do not rise to [an] overt signal about June but are consistent with comments that a June rate hike ought to be an option, depending on the data,” he added.

This week brings relatively few fresh reports, but they will be telling ones. Today we will get the April report on motor vehicle sales, and they are expected to be at a pace of 17 million on an annualized basis, up from 16.5 million in March. One of the things consumers have been buying in sizable numbers in recent months is cars, trucks and even SUVs as gas prices stay low — clear evidence of pent-up demand.

On Friday we will see the April jobs report. Experts’ consensus forecast is that the economy added 200,000, slightly below the March pace of 215,000. The jobless rate, likely buoyed by optimism among job seekers that there is now a place for them in this economy, is expected to remain at 5 percent.

Those who find jobs will enter an economy whose gross domestic product advanced a puzzlingly anemic 0.5 percent in the first quarter, given the steady job growth of the last year.

Why, if hiring remains strong, is economic growth slow? The New York Times posits that productivity is the issue. It’s not improving because businesses would rather hire people than invest in new technology or equipment to increase the volume of what they’re making to meet demand.

As a short-term development, this helps because there are still significant numbers of people who need jobs, but Michael Gapen, the chief U.S. economist at Barclays, told the Times that the trend could undermine prosperity in the long run.

“Economists view productivity growth and technological change as driving improvements in standards of living over time,” Gapen said. “A permanent slowdown in productivity growth would suggest that living standards rise more slowly.”


MRAA Board Contributes to BoatPAC

Every board member contributed to the non-partisan political action committee, which works with congressional members who recognize the importance of boating.

Educator Training Conference Agenda Announced

The ABYC Foundation’s virtual conference is scheduled for July 20-22, with speakers covering a host of topics around creating the future workforce.

RIMTA Awarded $30K Grant

The financial support will go toward its fiberglass boat recycling pilot project.

Sandy Hook Yacht Sales adds Intrepid

The dealership and brokerage firm has six locations in New Jersey and Florida.

Everglades Expands Executive Team

The Edgewater, Fla.-based manufacturer adds positions in finance, sales and marketing and operations.

Heed Caution While Refueling

Ethanol can be back in a big way, and insufficent labeling at the pumps could lead to problems for your marine powerplant. And the MRAA’s voices support for the 30 by 30 initaitive.

Training the Next Generation

Crest Pontoons will donate a complete boat and trailer to a local high school’s raffle to raise money for its vocational programs.

An “Above Average” Hurricane Season

BoatUS wants to help boaters get ready for the 2021 Atlantic hurricane season, which begins June 1.