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Robust consumer spending growth continues to support both economic expansion and corporate earnings, with higher income consumers generating the greatest positive impact. Consumer spending is a key economic measure as it drives nearly two-thirds of U.S. economic activity.1 Jobs, incomes, and rising asset prices fuel consumer health.
Wage growth and minimal layoffs have offset slower hiring in recent months. “Weekly jobless claims remain low and wages stable, based on U.S. Treasury income tax withholdings,” says Rob Haworth, senior investment strategy director at U.S. Bank Asset Management Group. Although the government shutdown delayed some data releases, U.S. workers’ average hourly earnings rose 3.7% over the past year, outpacing inflation, which increased 3.0% in September according to the Consumer Price Index.2 As a result, consumer incomes continue to exceed rising living costs nationwide. However, lower income earners have seen slower wage growth compared to higher earners, according to the Atlanta Federal Reserve’s wage tracker.
Recent tariff hikes on imported goods from major trading partners have caused only modest increases in core goods prices. President Donald Trump has announced and postponed several tariff plans. The effective tariff rate reached 11% in September and likely rose to near 12% in October. The Yale Budget Lab estimates that announced tariffs could push this rate as high as 16.8%, depending on consumer choices and negotiation outcomes.3
High-frequency data continues to paint a favorable picture
Investors rely on real-time indicators, which often lead economic trends. The recent government shutdown increased the importance of supplemental measures. Bill Merz, head of capital markets research at U.S. Bank Asset Management Group, notes, “Consumer spending proxies like retail sales, card swipes, restaurant bookings, and daily tax withholding statistics suggest aggregate consumer behavior remains solid.” He adds, “Domestic rail activity, trucking tonnage, and inbound containers to the Port of Los Angeles remain close to normal seasonal patterns.”