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Sharp Surge in Consumer Spending Backs GDP Growth: 5 Picks
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The nation’s gross domestic product (GDP) is on track for a mind-boggling year that could come teasingly close to a 13-year milestone. Consumer spending surged and helped the economy gain traction in the third quarter, making up for a slowdown in business investment.
This calls for investing in consumer discretionary companies that are poised to grow on signs of consumer spending strength.
Best Two-Quarter Stretch in Four Years
The U.S. economy got a boost in the third quarter, with GDP increasing at an annualized pace of 3.5%, per the U.S. Commerce Department. Economic growth during the July-September quarter was better than estimates of about 3.4%.
In fact, the country’s total output of goods and services followed an even stronger 4.2% growth in the second quarter, which marked the strongest rise since a 4.3% annual gain recorded in the third quarter of 2014.
The two quarters, thus, recorded the fastest six-month growth in four years and is on track to hit Trump administration’s annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession.
Economy Gets a Boost From Solid Consumer Spending
Government spending did pick up, but, it was robust consumer spending that powered the economy in the third quarter. Consumer spending, which accounts for more than two-third of economic output, grew 4% in the quarter, the strongest since the fourth quarter of 2014.
This strong rise in consumer outlays helped offset a 7.9% decline in business spending, which turned out to be the steepest quarterly drop since the first quarter of 2016. Republican had trimmed tax rate hoping to spur business investment, but, uncertainty surrounding trade tariffs weighed on spending on new equipment and plants.
What Drove Consumer Spending?
Consumer spending was largely driven by strength in the labor market. The U.S. unemployment rate fell to a 49-year low of 3.7% in September, the lowest since December 1969, per the Labor Department.
However, the month saw the minimum increase in hiring in the last 12 months due to a one-off factor. Hurricane Florence may have affected job numbers. But, the estimate for hiring in July and August were revised upward by 87,000 jobs. This boosted the monthly average job additions to a healthy 211,400 in the past year.
By the way, the $1.5-trillion tax cut package that Trump got Congress to pass last year did put a lot of money in consumers’ pocket. The tax bill trimmed the ultra-rich individual tax bracket from 39.6% to 37%, while the middle class has been excused from paying hefty taxes.
Consumer Spending Continues to Drive Output: 5 Winners
Courtesy of a rise in household spending, consumer discretionary companies are poised to benefit the most as outlays play a major role in determining their revenues. We have, thus, selected five consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers Outdoor Corporation (DECK - Free Report) designs, markets, and distributes footwear, apparel. The Zacks Consensus Estimate for its current-year earnings has increased 1.6% in the last 60 days. The company’s expected earnings growth rate for the current year is a solid 13.8%. The stock has outperformed the broader industry so far this year (+44.2% vs +9.7%).
Callaway Golf Company designs, manufactures, and sells golf clubs, golf balls and golf bags. The Zacks Consensus Estimate for its current-year earnings has increased 4% in the last 60 days. The company’s expected earnings growth rate for the current year is a superb 96.2%. The stock has outdone the broader industry on a year-to-date basis (+56.7% vs -5.2%).
Guess', Inc. (GES - Free Report) designs, markets, distributes, and licenses lifestyle collections of apparel and accessories. The Zacks Consensus Estimate for its current-year earnings has increased almost 1% in the last 60 days. The company’s expected earnings growth rate for the current year is an encouraging 48.6%. The stock has surpassed the broader industry so far this year (+24.7% vs +10.2%).
Lululemon Athletica Inc. (LULU - Free Report) is an athletic apparel company. The Zacks Consensus Estimate for its current-year earnings has increased 7.5% in the last 60 days. The company’s expected earnings growth rate for the current year is a promising 38.2%. The stock has outpaced the broader industry on a year-to-date basis (+71.6% vs +10.2%).
Marine Products Corporation (MPX - Free Report) designs, manufactures, and sells recreational fiberglass powerboats. The Zacks Consensus Estimate for its current-year earnings has increased 7.3% in the last 60 days. The company’s expected earnings growth rate for the current year is a solid 46.7%. The stock has outperformed the broader industry so far this year (+59% vs -5.2%).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Sharp Surge in Consumer Spending Backs GDP Growth: 5 Picks
The nation’s gross domestic product (GDP) is on track for a mind-boggling year that could come teasingly close to a 13-year milestone. Consumer spending surged and helped the economy gain traction in the third quarter, making up for a slowdown in business investment.
This calls for investing in consumer discretionary companies that are poised to grow on signs of consumer spending strength.
Best Two-Quarter Stretch in Four Years
The U.S. economy got a boost in the third quarter, with GDP increasing at an annualized pace of 3.5%, per the U.S. Commerce Department. Economic growth during the July-September quarter was better than estimates of about 3.4%.
In fact, the country’s total output of goods and services followed an even stronger 4.2% growth in the second quarter, which marked the strongest rise since a 4.3% annual gain recorded in the third quarter of 2014.
The two quarters, thus, recorded the fastest six-month growth in four years and is on track to hit Trump administration’s annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession.
Economy Gets a Boost From Solid Consumer Spending
Government spending did pick up, but, it was robust consumer spending that powered the economy in the third quarter. Consumer spending, which accounts for more than two-third of economic output, grew 4% in the quarter, the strongest since the fourth quarter of 2014.
This strong rise in consumer outlays helped offset a 7.9% decline in business spending, which turned out to be the steepest quarterly drop since the first quarter of 2016. Republican had trimmed tax rate hoping to spur business investment, but, uncertainty surrounding trade tariffs weighed on spending on new equipment and plants.
What Drove Consumer Spending?
Consumer spending was largely driven by strength in the labor market. The U.S. unemployment rate fell to a 49-year low of 3.7% in September, the lowest since December 1969, per the Labor Department.
However, the month saw the minimum increase in hiring in the last 12 months due to a one-off factor. Hurricane Florence may have affected job numbers. But, the estimate for hiring in July and August were revised upward by 87,000 jobs. This boosted the monthly average job additions to a healthy 211,400 in the past year.
By the way, the $1.5-trillion tax cut package that Trump got Congress to pass last year did put a lot of money in consumers’ pocket. The tax bill trimmed the ultra-rich individual tax bracket from 39.6% to 37%, while the middle class has been excused from paying hefty taxes.
Consumer Spending Continues to Drive Output: 5 Winners
Courtesy of a rise in household spending, consumer discretionary companies are poised to benefit the most as outlays play a major role in determining their revenues. We have, thus, selected five consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers Outdoor Corporation (DECK - Free Report) designs, markets, and distributes footwear, apparel. The Zacks Consensus Estimate for its current-year earnings has increased 1.6% in the last 60 days. The company’s expected earnings growth rate for the current year is a solid 13.8%. The stock has outperformed the broader industry so far this year (+44.2% vs +9.7%).
Callaway Golf Company designs, manufactures, and sells golf clubs, golf balls and golf bags. The Zacks Consensus Estimate for its current-year earnings has increased 4% in the last 60 days. The company’s expected earnings growth rate for the current year is a superb 96.2%. The stock has outdone the broader industry on a year-to-date basis (+56.7% vs -5.2%).
Guess', Inc. (GES - Free Report) designs, markets, distributes, and licenses lifestyle collections of apparel and accessories. The Zacks Consensus Estimate for its current-year earnings has increased almost 1% in the last 60 days. The company’s expected earnings growth rate for the current year is an encouraging 48.6%. The stock has surpassed the broader industry so far this year (+24.7% vs +10.2%).
Lululemon Athletica Inc. (LULU - Free Report) is an athletic apparel company. The Zacks Consensus Estimate for its current-year earnings has increased 7.5% in the last 60 days. The company’s expected earnings growth rate for the current year is a promising 38.2%. The stock has outpaced the broader industry on a year-to-date basis (+71.6% vs +10.2%).
Marine Products Corporation (MPX - Free Report) designs, manufactures, and sells recreational fiberglass powerboats. The Zacks Consensus Estimate for its current-year earnings has increased 7.3% in the last 60 days. The company’s expected earnings growth rate for the current year is a solid 46.7%. The stock has outperformed the broader industry so far this year (+59% vs -5.2%).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>