U.S. consumers are the engine that powers the U.S. economy. Spending by folks on Main Street accounts for roughly two-thirds of the nation’s economic activity. And confident consumers who feel good about themselves and who earn decent wages and have cash to spend are the types of consumers Wall Street loves most.
A healthy consumer willing to spend is good for corporate profits, as cash registers that scream ka-ching, ka-ching are good for both the top and bottom line. If the stock market, which is trading near record highs and is no longer cheap, is to continue to find a following of willing buyers on Wall Street and Main Street, corporations have to keep churning out strong profit growth.
Recent readings on the job market, which point to more work and fewer folks lining up to sign up for unemployment benefits, point to a happier consumer. And the latest reading on the mood of consumers in August, released by the Conference Board on Tuesday, showed consumer confidence at a post-recession high. Stronger-than-expected readings released Thursday on second-quarter GDP and the number of pending home-sale contracts in July also point to consumer strength.
The consumer will get another stress test today, when data will be released on July personal income and spending. The University of Michigan will also release its final read on August consumer sentiment. Hopefully, the data will add up to a happy consumer.