What U.S. Consumer Spending Data Is Telling Us

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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.

[Editor's Note: Keith Fitz-Gerald has hit winner after winner. In fact, his Geiger Index advisory service has notched 64 winners out of 67 total trades over the past three years.

That's a success rate of 95.5%.

If you aren't already getting Keith's market updates, just click here to check out his latest free report.]

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About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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