Charts Of The Moment: How Is The U.S. Consumer Doing?

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Includes: BIL, DDM, DFVL, DFVS, DIA, DLBS, DOG, DTUL, DTUS, DTYL, DTYS, DXD, EDV, EEH, EGF, EPS, EQL, FEX, FIBR, FWDD, GBIL, GOVT, GSY, HUSV, HYDD, IEF, IEI, ITE, IVV, IWL, IWM, JHML, JKD, OTPIX, PLW, PSQ, PST, QID, QLD, QQEW, QQQ, QQQE, QQXT, RINF, RISE, RSP, RWM, RYARX, RYRSX, SCAP, SCHO, SCHR, SCHX, SDOW, SDS, SFLA, SH, SHV, SHY, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TAPR, TBF, TBT, TBX, TLH, TLT, TMF, TMV, TNA, TQQQ, TTT, TUZ, TWM, TYBS, TYD, TYNS, TYO, TZA, UBT, UDN, UDOW, UDPIX, UPRO, URTY, USDU, UST, UUP, UWM, VFINX, VGIT, VGLT, VGSH, VOO, VTWO, VUSTX, VV, ZROZ
by: Brandywine Global Investment Management
Summary

After drifting lower over the last several months, both U.S. consumer confidence and expectations popped in February.

Late fourth-quarter events like the federal government shutdown and the broad-based selloff in equities were a drag on optimism.

The risk of a government debt ceiling stalemate looms, but in the interim, equity market performance has been relatively more stable.

After drifting lower over the last several months, both U.S. consumer confidence and expectations popped in February. Late fourth-quarter events like the federal government shutdown and the broad-based selloff in equities were a drag on optimism. Chart 1 shows how same-store dollar volume tracked these sentiment factors, with retail transactions in sharp retreat at the end of last year. So what's changed? The risk of a government debt ceiling stalemate looms, but in the interim, equity market performance has been relatively more stable. Perhaps more importantly, the Federal Reserve gave consumers and businesses alike a reprieve by pledging to be patient with respect to monetary policy. Chart 2 compares the commercial bank interest rate - typically the annual percentage rate for credit cards - versus the Fed Funds rate. Up until recently, that commercial rate was moving toward its 20-year high. We'll have to see if a rebound in consumer confidence can offset the drag on consumption typically associated with the higher credit card rates.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.