Consumer Economic TrendsDecember 2016 Chartbook

ChuckMcKayckmckay@me.com

Consumer Economic Trends – November 2016

12/4/16 ConsumerEconomicsChartbook- CKMcKay 2

Summary• TheU.S.economygrewarevised3.2%in2Q,thestrongestgainintwoyears.

Consumerspendingwasrevisedupwardsduetoejumpindurables.Businessinvestmentremainedweekoverallwithanincreaseinstructuresoffsetbyadeclineinequipmentspending.Uncertaintyovertheelectionandworldaffairsingeneralappearstoberestrainingbusinessinvestmentwhichcoulddampenfuturegrowth

• DuringOctoberdisposableincomewasup0.6%,butaverageweeklyearningsdeclined0.1%inNovember

• Consumerspendingwasup0.3%inOctoberandretailsalesgrew0.8%.Thedragfromgasolinestationsaleswasgreatlydiminished

• Novemberjobgainsweredecentat178,000;moderatingjobsgrowthhasreducethetwelvemonthaverageto188Kfrom230ayearago.Thebroaderemploymentratioshavefailedtoimproveduring‘16

• Consumerrevolvingdebtgrowthhashoverednear6%sinceMarch,andthedebttoincomeratioremainedstableandbelow7%

• Post-electionconsumersentimentjumped6.5pointsto93.8.Asconsumersanticipateimprovedpersonalfinancesandgeneraleconomicconditions

• Smallbusinessoptimismedgedup0.8inOctober,butconcernsoverelectionacrimonydrovetheindex’suncertaintycomponenttoa42yearhigh

ListofCharts1. Disposableincome2. Consumerspending3. Retailsales4. Ecommercesales5. Jobsgrowthvs.UIclaims6. Employmentratios7. Wagegrowthvs.inflation8. Revolvingcredit9. Purchasevolume10. Consumersentiment11. Smallbusinessoptimism

Annual disposable personal income growth increased 0.3 ppt to 4.1% in October. The savings rate ticked up to 6.0%. For the last several months income growth, taxes and savings have been fairly stable

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17.0%

17.5%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

-4%

-2%

0%

2%

4%

6%

8%

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12%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Personal Income and Savings

Disposable Personal Income Y/Y Growth% Personal Savings Rate % Tax Burden % Personal Income (right scale)

Source:BureauofEconomicAnalysis

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Consumer advanced in October led by a strong jump in durable goods purchases. Also increased gasoline spending nearly eliminating the two year drag energy has had on overall consumer spending

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-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

10%

'11 '12 '13 '14 '15 '16

Nominal Consumer Spending Growth Y/Y%

Total Consumer Spending

Durable Goods

Nondurable Goods

Services

Nondurable Goods ex. Energy

Source:BureauofEconomicAnalysis

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Retail sales grew 0.8% in October and year-over-year growth increased 4.2%, the highest rate since Nov. ‘14, as Q4 consumer spending got off to a good start. Gasoline station sales increased 2.2% during Oct., Y/Y gas station sales were up 0.9% the the first gain since May ‘14

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-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

'11 '12 '13 '14 '15 '16

Retail Sales Growth Y/Y%

Total Retail Sales Excluding Autos Ex. Autos & Gasoline Stations Gasoline Stations (right scale)

Source:CensusBureau

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During the last four quarters e-commerce contributed over 56% of retail sales growth… falling gasoline sales has accelerated e-commerce’s growth impact

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-45%

-30%

-15%

0%

15%

30%

45%

60%

75%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

E-Commerce Sales Growth Y/Y%Note: This chart is updated quarterly

Total Retail Sales E-commerce Total ex. E-commerce E-commerce Overall Growth Contribution 4Q Average (right scale)

Source:CensusBureau

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Jobs gains continued at a more moderate pace with 178K reported for November and prior month revisions a negative 2K. The three month average job gains held steady at 176K. The 12 month average job gains were 188K, the lowest since February ‘14. Initial claims remain historically low

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250 280 310 340 370 400 430 460 490 520 550 580 610 640 670 700 -900

-800-700-600-500-400-300-200-100

0100200300400500600

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Monthly Employment Gains vs. Unemployment Claims (Thousands)

Monthly Payroll Employment Gains 4 Week Moving Average Unemployment Claims (right scale inverted)

Source:BureauofLaborStatistics

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The unemployment rate dipped to 4.6%, the lowest level since August ‘07. However, the drop was driven more by a labor force decline than an increase in employment. The broader employment ratios made little progress as ’16 has been unable to sustain the positive trends seen during ’14 - ’15

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1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

57%

58%

59%

60%

61%

62%

63%

64%

65%

66%

67%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Employment Ratios

Labor Force Participation Rate Employment-Population Ratio Unemployment Rate (right scale)

Source:BureauofLaborStatistics

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Wage growth fell 0.1% in November. Y/Y growth decreased to 2.5%, giving up the gains seen over the last two months. Y/Y inflation was the highest in two years

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-1%

0%

1%

2%

3%

4%

'10 '11 '12 '13 '14 '15 '16

Wage Growth vs. Inflation

Average Hourly Earnings Y/Y Growth CPI Y/Y % Change Core CPI Y/Y % Change

Source:BureauofLaborStatistics

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The revolving credit growth rate has been stable at ~6% since March. As a percentage of disposable income, revolving credit has remain stable at ~2ppt below its pre-recession level

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-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

$800

$825

$850

$875

$900

$925

$950

$975

$1,000

$1,025

$1,050

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Consumer Revolving Credit Consumer Revolving Credit Outstanding

Consumer Revolving Credit Y/Y% Growth (right scale)

Consumer Revolving Credit as a % of Disposible Personal Income (right scale)

Source:FederalReserve,BureauofEconomicAnalysis

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Billions

Q3 payment card purchase volume year-over-year growth slid 1.9ppt to 6.0%

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-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

'08 '09 '10 '11 '12 '13 '14 '15 '16

Network Payment Card Purchase Volume Growth Y/Y%

Source:AXP,DFS,MA,VCompanyReports

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The Consumer Sentiment index dipped to 93.8 post-election as consumer optimism for their financial situation and the economy rose on Trump’s victory

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-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

40

50

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100

110

120

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Consumer Sentiment

University of Michigan Consumer Sentiment Y/Y% Change (right scale)

Source:UniversityofMichigan

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Small business optimism index gained 0.8 in October, but the uncertainty component hit a 42 year high on election concerns. The trailing six month moving average edged up to 94.4; still below the index's long run average of 98

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80

85

90

95

100

105

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Small Business Optimism

NFIB Small Business Optimism Index 6 Month Moving Average

Source:NationalFederationofIndependentBusiness

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