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Personal Consumption Rising At Slow Pace

Published 11/14/2013, 01:53 AM
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Last week’s personal income data released by the BEA showed that personal consumption expenditures grew year over year at the slowest pace this cycle on both a nominal and inflation adjusted basis. The nominal (not inflation-adjusted) data is particularly troublesome because the increase was the slowest growth outside of a recession going back to 1959.

The main reason for the weak nominal growth is due to weak inflation. To an economist that’s not that big of a deal since “real” consumption growth is what drives general welfare. But to a securities analyst focused on equities, the lack of inflation could pose a headwind for earnings growth. Earnings and revenue are nominal, not inflation-adjusted numbers. If top-line consumption is only growing 2.5% then 10% earnings growth, which is what analysts are currently forecasting, is going to be hard to come by.
Personal Consumption Expenditures
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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