Consumer spending jumps while earnings and PMI slow

The great news of consumer spending’s .8% February leap was short-lived when further data revealed that much of consumers’ coffers were emptied into their energy needs.  Personal income did increase .2% during February, however, but missed analysts’ expectations.

Personal savings declined to 3.7%, a percentage point down from the end of 2011.  Overall, 70% of the U.S. economy relies on consumer spending trends and so this data is critical to overall economy.

March was positive for consumer sentiment as reported by UMich, jumping to 76.2 from 75.3, the highest reading in over a year.  Thomson Reuters / University of Michigan gauges the level of consumer spending and readings of 87 is considered “normal” and was the the pre-recession average.

Related ETFs reacted to the news with the Dow Jones Industrial Average (NYSEARCA:DIA) climbing 50 points at mid day Eastern time, Select Sector SPDR Industrial ETF (NYSEARCA:XLI) climbing 0.43%, Vanguard Industrials ETF (NYSEARCA:VIS) +0.37% and iShares U.S. Dow Jones Industrial ETF (NYSEARCA:IYJ) adding 0.35%.

The Chicago March PMI was today’s most widely watched indicator and came in at 62.2, missing expectations and declining from last month’s 64.  Readings above 50 indicate expansion. New orders dropped from 69.2 to 63.3 while prices paid took a big jump to 70.1 from last month’s 65.6 as inflation number continue creeping into economic data points.  The all important employment index dropped to 56.3 from last month’s 64.2 which bodes ill for future unemployment reports.

Bottom line: The U.S. economy continues to grow but also shows signs of slowing down, most likely feeling the weight of higher energy costs and slowing demand from Europe and China, however, stocks and ETFs continue a slow grind higher to the top of recent trading ranges.

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About John Nyaradi (http://www.wallstreetsectorselector.com) John Nyaradi is Publisher of Wall Street Sector Selector: Your Home For ETF Investing! John writes a weekly guest column, John Nyaradi’s ETF Edge for MarketWatch.com and his investment articles have appeared in many online publications including Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, ETF Daily News, iStock Analyst , among many others. His book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs, is published by John Wiley and Sons and included among the Years Top Investment Books in the 2011 Stock Trader’s Almanac.