Economic Report Card: Spending Flat, Income Up

Monday economic report card paints mixed picture for ETFs, economy

Reports from the government today show that consumer spending was flat in December and that consumers spent less than forecast while their incomes and savings rose.

ETFs in the all important consumer sector which accounts for 70% of U.S. economic activity declined on the news with Sector Select Consumer Discretionary SPDR ETF XLY declining -0.6% after putting heft gains so far in 2012, and Sector Select Consumer Staples ETF XLP fared even more poorly with early declines of 0.8%.

Good news came from consumer incomes which climbed 0.5% in December according to the  U.S. Commerce Department and the savings rate climbed to 4% as more money went into bank accounts than to the mall.

GDP slowed last quarter to a lower than expected 2.8% and this tepid growth is expected to continue as consumers struggle with high unemployment and too much debt.  In other economic news, inflation remained tame with the core price index rising 1.8% which is close to the Federal Reserve target of 2%.

Meanwhile, according to the Texas Manufacturing Activity report, things continue to improve in Texas with factory activity growing in Januarym along with new orders, shipments, capacity utilization and general business activity returned to positive territory after a negative December.

Bottom line: The U.S. economy continues to muddle along in choppy fashion with some areas performing better than others.  Consumers are key and early 2012 data point to confirmation of continued slowing in the economy.

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