Skip to Content
Investing Specialists

A Tale of Two Recoveries

While the 'Tiffany's Recovery' continues, lower-income consumers are being pummeled.

Mentioned: , , , , , , ,

For the second week in a row, economic data were almost uniformly bearish. GDP was not revised upward despite my hopes and forecasts. Durable goods orders looked weak, pending home sales fell, and initial unemployment claims made another move up.

While poor weather and the shock of the natural disasters in Japan certainly didn't help matters, it is hard to argue that there was a lot of underlying strength. In fact, consumer strength in the December quarter looks largely like a mirage, driven by unbelievable strength in auto sales in the December quarter that quickly reversed itself in the March quarter. Consumer spending has barely budged from its 2% growth rate during each of the seven quarters of this recovery.

Consumer Incomes Looking Soft
Perhaps the most disappointing news of the week was the sharp downward revision to the estimate of consumers' real disposable income for most months of the fourth quarter of 2010 and the first quarter of 2011. It now appears that real incomes went almost nowhere in the first quarter even as consumer spending managed small increases.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.