Executive Summary
In March, the personal income and outlays report showed faster growth in outlays compared to income, 0.9%, and 0.5%, respectively. Durable goods expenditure continued to grow despite the negative trend in used autos while unemployment insurance remained unchanged. In conclusion, hold your healthcare stocks, stay away from stocks in the used car industry but stay invested in the S&P 500 and NASDAQ 100.
Why Should Investors and Traders Care About This Coincident Economic Indicator!
The personal income and outlays report is a coincident indicator that looks at a country’s economic health through personal income from wages, salaries, investments, and government benefits and expenditures from disposable income. Strong income is a great sign of economic growth while a declining one is not. Disposable income is the remainder of wages and salaries after taxes and other required payments. By the end of this investment report, you will know enough to make an informed investment decision based on the current personal income and outlays report.
Personal Income Key Points
Personal income up-trended on all major time-frames; year-to-date, MoM, and YoY, it was up 0.8%, 0.5%, and 4.7%, respectively. Wages and salaries from the government grew faster than those from private industries on a YoY basis, 8,5% and 5.5%, respectively. Personal current transfer receipts were up 3.1% YoY; MoM, unemployment insurance remained unchanged at $22.9B. YoY and MoM, Income from personal current taxes increased by 0.6% and 8.8%, respectively. Disposable income was 87% of total personal income; YoY, disposable income grew 4.1%.
Personal Outlays Key Points
Now let's take a deeper look at the current consumer trends based on the personal consumption expenditure report by the Bureau of Economic Analysis. Respectively, goods and services comprised 33% and 66% of total personal consumption expenditure. MoM goods grew 1.3% while Services only grew 0.6%. Under goods, durable goods and nondurables comprised 35% and 65% of total goods, respectively. Motor vehicles and parts saw an uptrend in new motor vehicles while the downtrend in used autos continued since Apr '23. Despite being up by 0.3% on a MoM basis, motor vehicles and parts were down -2.9% YoY.
On the other hand, MoM, Ytd, and YoY used autos were down -2.1%, -3.1%, and -14%, respectively. Ytd and MoM, furnishings and durable household equipment were up 1.2% and 1%, respectively. Ytd and MoM, recreational goods and vehicles grew 3% and 1.6%, respectively. Services saw the biggest MoM growth on financial, recreational, and healthcare services, up 1.3%, 1%, and 0.7%, respectively.
Investment Analysis
Based on the latest personal income and outlays report by the Bureau of Economic Analysis, personal income is steadily growing, representing a growing economy. Personal consumption expenditures on durable goods increased $34B in Mar '24, implying a resilient consumer base. Unemployment insurance is stable, implying little economic hardship for the American people. In conclusion, we recommend staying out of the used car industry, holding some healthcare stocks, and staying invested in the S&P500 and NASDAQ 100. In addition, there is no need to buy defensive, or utility stocks as personal consumption expenditure is still growing for durable goods.
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