Monday Moneybeat: Robust consumer spending

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Let’s talk about consumer spending. This is the big driver of gross domestic product. 

In macroeconomic analysis, this crucial consumer-spending number is personal consumption expenditures, PCEs. For the month of November, PCEs grew at the fastest annual rate since July. If you compare consumer spending to last year, it’s 4 percent higher.

This number accounts for about 70 percent of GDP, and you may remember consumer spending actually dipped last December and that put a damper on an otherwise solid year in 2018. This year’s been not great, but good, and the indications so far are that consumer spending has continued to expand in December, and that’ll show up when all the data are counted later next month.

Personal income rose half a percentage point after another big surge in jobs. And the Atlanta branch of the Federal Reserve reported that pay for the bottom quarter of workers rose at a higher rate than for the top 25 percent. The lowest-wage workers saw pay go up 4-1/2 percent year on year versus the highest-wage workers, just shy of 3 percent. That’s consistent with the tight labor market, where employers are having to compete for workers by offering fatter paychecks.

REICHARD: More records set on Wall Street, nine in total last week, even with the holiday-shortened trading week. 

The major stock indexes set records three of the four trading days. It was the fifth straight winning week for the Standard & Poor’s 500 index, the 11th over the last 12 weeks, and the 35th time it set a new record high this year. 

The S&P 500 is within striking distance today and tomorrow to post a 30 percent increase on the year. It needs to pick up just 7/10s to pull that off.

The tech-heavy Nasdaq is the runaway best performer of all the major indexes. It’s picked up more than 35 percent in value this year already, crossing the 7,000, then the 8,000, and last week the 9,000 mark.

The Dow Jones Industrial Average is up a solid 23 percent on the year and ended the week on an all-time high.

EICHER: The housing market continues its recovery. Sales of newly built homes went up in November 1.3 percent over the previous month. So far this year, new-home sales are up almost 10 percent. 

Again, it’s a function of the solid jobs market and rising wages, but also a function of lower mortgage interest. The Federal Reserve has cut the federal funds rate this year three-quarters of a percent, and that’s had a ripple effect at the consumer level. 

As a result, loans to finance home purchases are cheaper. The average interest rate on a 30-year mortgage is now under three and three quarters percent, versus more than four and a half a year ago. Bottom line, the difference in principal plus interest on the median home price is close to a $150-a-month in savings.

And that is today’s Monday Moneybeat.

(AP Photo/Jeff Chiu, File) In this Nov. 29, 2019, file photo a man carries shopping bags across the street from a Macy’s store in San Francisco. 

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