New Data Show the U.S. Recovery is Still Strong

By Matthew Klein |  Friday, June 25 Reopening. The monthly personal income and outlays report from the Bureau of Economic Analysis is the single best snapshot of what’s going on in the U.S. economy. The good news that came out this morning lifted global stocks, bond yields, and the oil price. The big takeaway was that the U.S. private sector is continuing to grow at a brisk clip. Americans’ total wage and salary income was up 0.8% in May and is now more than 5% higher than before the pandemic. While millions of Americans remain jobless, many Americans are doing better than ever. Consumer spending in May was essentially flat, but there were some big changes under the hood. Spending at movie theaters, amusement parks, photo studios, and passenger trains jumped 15% to 20% in May compared with April, while spending on motor vehicles tanked almost 10% in May after surging earlier in the year. The data are consistent with a healthy rebalancing of demand from goods to services as the threat of the virus recedes thanks to mass vaccination. That’s particularly fortunate for the motor vehicle sector, which has been facing unprecedented strains over the past year. I wrote more about that on Barrons.com in the context of the latest numbers on inventories at dealerships and manufacturers. Then there are the numbers on inflation. The Personal Consumption Expenditure price index was up 3.9% in May compared with last year. Before the pandemic, the PCE price index was rising 1.8% a year. Of that 2.1 percentage point acceleration, about 1.8 percentage points can be explained by the normalization of the oil price, the idiosyncratic troubles in the motor vehicle market, and the normalization of prices for hotels, restaurants, and air travel. All of those forces should fade by the end of the year. U.S. stocks were positive on the day, with the S&P 500 index up 0.3% to hit a new high. The index has set 31 new records so far this year. Ten out of the 11 sectors were green, with the biggest wins in financial stocks, utilities, consumer staples, and real estate. Technology, materials, and communication services were the worst-performing sectors. The best performer was Nike, which soared 15.5% after releasing earnings. On the other side was FedEx, which fell 4%. The stock is down about 8% so far this month, although it’s up more than 12% year-to-date, which is still better than Nike. Global stocks also did well, with the Nikkei 225 up 0.7%, the KOSPI Composite up 0.5%, the Shanghai Composite up 1.2%, Australia’s ASX up 0.5%, Canada’s TSX up 0.1%, the STOXX Europe 600 up 0.1%, and the FTSE 100 up 0.4%. Yields across the Treasury curve were up, as were the prices of gold, silver, and crude oil. But the copper price was down slightly. Watch our TV show on Fox Business Fridays at 10 p.m. or 11:30 p.m. ET; Saturdays at 10 a.m. or 11:30 a.m. ET, or Sundays at 7 a.m., 10 a.m. or 11:30 a.m. ET. This week, an interview with Royal Caribbean CEO Richard Fain on the cruise industry’s restart.

 

DJIA: +0.69%  to 34,433.84 S&P 500: +0.33% to 4,280.70 Nasdaq: -0.06% to 14,360.39 The Hot Stock: Nike +15.5% The Biggest Loser:  FedEx -3.9% Best Sector: Financials +1.2% Worst Sector: Technology -0.1%