U.S. Consumer Trends – Insights from Milken Global Conference

All the popular sessions on the first day seem to revolve around the same topic: economic growth. My second session for Monday morning was titled “U.S. Overview: Can the U.S. Engine Pull the Global Growth Train” and the topic was…economic growth. This session dovetailed very nicely with the first session, which was moderated by Jim McCaughan, CEO of Principal Global Investors (see my previous blog post for details). With a really distinguished panel of experts, the U.S. overview dug into the details of where job growth and economic acceleration was coming from in the United States. Given that this was an examination of the U.S. economy, the consumer was the first topic that the panel jumped on. And when it comes to U.S. consumer insights, Bill Simon (president and CEO of Wal-Mart U.S.) and Sarah Quinlan (Senior Vice President Market Insights, MasterCard Advisors) are in extremely unique positions to provide insights.

Simon, acknowledging that his company sees 140 million customers a week, spoke about “encouraging customer patterns.” He seemed relatively upbeat on retail spending, but said that consumer demand was still “lumpy” and was definitely affected by the harsh winter weather in the Midwest and Eastern United States. Adding on to this, Quinlan spoke of trends her company was seeing in consumer credit card purchases. One thing she noted was an increase in what she called “flying vacations.” As she noted, consumers who commit to a vacation that includes air travel are committing to spending money on the trip. Since the majority of Americans don’t have passports, she was relatively confident that a good deal of this spending will stay within the United States.

This line of conversation actually reminded me of something that Bob Baur, Principal Global Investors’ chief global economist, has been saying for while – that positive economic news is paving the way for increasing optimism for consumers, and in turn, businesses. As in a blog post from earlier this year, Bob says that economic pessimists are suffering from PCRD (Post Crisis Relapse Disorder), a U.S. economic mental affliction that leaves the afflicted with a feeling that the economy is poised for another tumble into recession. As you’ll see in Bob’s post, the best treatment for PCRD is positive economic news, and that’s the direction the panelists are pointing towards. Bob has also seen consumers taking vacations that they’ve postponed over the last several years as a very positive sign

The measured optimism I heard from the panelists also harkened to some comments that Jeff Schwarte, a portfolio manager with Principal Global Equities, made about a month ago. Jeff posted on positive trends in capital spending, which was bolstered by comments from Eric Spiegel, the president and CEO of Siemens USA. Siemens is tied directly to health care, municipal, and national infrastructure, so his positive comments drew interest from the attendees and reaffirmed the thinking of Principal Global Investors’ investment professionals.

Check back later today. Next session of interest will look at how the U.S. debt load is affecting economic growth.



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