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Gallup’s report: Discretionary consumer spending surges last month

Phalguni Soni

A must-know investor's guide to the evolving consumer health (Part 2 of 8)

(Continued from Part 1)

Gallup’s U.S. consumer spending indicator

The results of Gallup’s self-reported consumer spending poll for the U.S. in the month of February, were released on March 3. Gallup tracks daily discretionary expenditures through 13,000 interviews with American adults, which queries survey respondents on their discretionary spending expenditure the previous day. The expenditure estimate does not include regular household bills and what consumers spent on big-ticket items like refrigerators, cars, etc.

How much did consumers spend on average in February?

The average consumer spending for Americans surged to $87 per day in February, from January’s unusually low level of $78, which was largely impacted by the severe winter weather. January’s spending levels are generally lower after the holiday season in November and December, when consumers normally splurge. However, this January, daily average spending levels dropped to $78 from $80 the previous year.

February’s rebound to $87 per day, was higher than the $83 average seen in February 2013, as consumers made up for January’s consumption postponement. February’s average spending levels were first seen in 2008, and the difference between January and February daily spending levels at $9, was the highest recorded since Gallup first began tracking the indicator, seven years ago.

Discretionary spending would directly impact the retail sector; an increases in the discretionary spending is likely to increase the top-line results for retailers and vice versa. The Market Vectors Retail ETF (RTH) tracks the Market Vectors US Listed Retail 25 Index. The Index is designed to track the overall performance of the 25 largest, publicly listed retailers in the U.S. Top holdings in the ETF include Amazon.com (AMZN) (8.1%) and Wal-Mart Stores (WMT) (8.04%).

The iShares 20+ Year Treasury Bond (TLT) ETF tracks The Barclays Capital U.S. 20+ Year Treasury Bond Index which measures the performance of U.S. Treasury securities that have a remaining maturity of at least 20 years.  The Core Total U.S. Bond Market ETF (AGG) tracks the Barclays U.S. Aggregate Bond Index. The Index measures the performance of the U.S. investment grade bond market investing in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.

In Part 3, we will discuss about Gallup’s survey on discretionary spending and how it affects the fixed income ETFs like TLT and AGG.


Continue to Part 3

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