Some new data out of ISI Group puts the surprising strength of the American public in full view. The data shows that nominal consumer spending made a new high four months ago and is now clearly above its 2008 peak (based on core retail sales, February spending probably rose 0.5%).
But when you count inflation, “real” consumer spending is also more than likely at a new high. Indeed despite the high unemployment rate, nominal retail sales are up 6.1% annualized over the past nine months.
Some segments are doing better than average. Judging from surveys of auto dealers, ISI analysts figure that March vehicle sales are on track to hit a 10.5 million run rate, or +8.4% year over year. Restaurant sales are also surging, particularly in the past four weeks.
Part of the reason for this is a boost in consumer net worth due to strength in the stock market. The Wilshire 5000, the broadest measure of the U.S. equity market, is up 75% from its 2009 low to $12 trillion in market capitalization. Add to that a rise in home values, and you can see why people with jobs, at least, feel more comfortable at the malls.
Now there’s some really positive news about the world’s billionaires — as if they needed any more good fortune. The latest tally by Forbes shows that the collective net worth of the world’s 10 richest billionaires rose 25.1% since 2000 to $344 billion this year. Here’s something interesting: Four of those super-billionaires are actually from emerging markets: Two from India, and one each from Mexico and Brazil.
I guess we know now why General Dynamics (GD) has been doing so well, as its Gulfstream jets are the favorites of the emerging super-rich. Above you can see the shares of Textron (TXT), which also makes popular private jets under the Cessna nameplate, as well as helicopters and Pentagon weaponry. It’s one of the companies that is powering our iShares Aerospace/Defense (ITA), and looks like it could double in the next 12 to 18 months as it emerges from a long base.
Back down on earth, there’s some good news too. ISI analysts are joining Morgan Stanley in the expectation for a very strong report on March payroll employment. ISI sees the potential for 190,000 jobs to have been added this month, even following last month’s negative number. Only around 90,000 of that is expected to be census related. Moreover ADP surveys suggest that a large part of that improvement is coming from small businesses.
Around the world, similar improvements are showing up. ISI reports that employment is now increasing in Canada, Germany, Japan and Australia — all increasing the odds that U.S. employment is turning higher too. This forecast is supported by surveys done by the University of Michigan and Conference Board, as well as results published by temp firms.
More random pluses from ISI surveys show big improvements among home builders, truckers, capital goods manufacturers, restaurants and auto dealers. One of my favorite measures is transportation, and we’re seeing it there too: Container exports at the top California port in Long Beach are up 31% year over year; elsewhere, railroad car loadings are up 19% annualized in the last nine months, the oil rig count continues to rise and federal corporate tax receipts in February were up 55.9% year over year.
In short, a recovery is certainly under way. We can debate about whether it was just government stimulus driven, and how sustainable it is, but the main point is that it is happening. This is why the stock market has room to advance further than we initially believed at the start of the year.
For more ideas along these lines, check out my Trader’s Advantage newsletter.
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