What U.S. Consumer Spending Data Is Telling Us

The markets slid yesterday on news that U.S. consumer spending increased by 0.3% in March, while income rose 0.4% over the same time frame. This is the first time since December we've seen income rise faster than spending.

I can't say I am entirely surprised.

As prices for "must haves" like gasoline and food continue to rise, consumers are digging into their savings to cope. This is not small potatoes, given that the average family saved a mere $38 out of every $1,000 in take home pay last month, according to the U.S. Commerce Department.

I can't help but have huge concerns about Team Bernanke's plan; no amount of stimulus is going to overcome the struggle most families are having - which is to boost savings and shed debt.

Here's the thing... if consumers can't save, then they can't buy. And if they can't buy, they can't build up the nation's wealth, which is predicated on consumer spending.

All three sets of figures in isolation really don't tell you much. But when taken together - spending, income, and GDP - they suggest our economy is too weak to put millions of Americans back to work, much less in jobs for which they are appropriately qualified.

You can see that in last Friday's report on our nation's gross domestic product, which reflected a significant slowdown, from 3% in Q4/2011 to 2.2% in Q1/2012.

Either way, we'll know better on Friday morning when April's jobs figures are posted. If job gains are above 100,000, then it's reasonable to expect continued slow going but going nonetheless. If they are below 100,000, then we have reason to pull our horns in because the lack of new jobs may corroborate the income, spending, and GDP figures.

Here's the key takeaway from all of this data: Nearly 75% of the 275 companies that have reported so far this earnings season have beaten analyst expectations. Average earnings are up 7.1% versus expectations of merely 2.2% a month ago, according to Navellier and Associates.

That's good because earnings are probably the ultimate determinate of future market direction. As long as they are rising, the directional bias is up, especially if they're "glocal" and have high dividends, like those we prefer.

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