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Strong Consumer Spending Adds Pressure on the Fed to Raise Rates

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Consumer spending at a multiyear high

US consumer spending, as reported by the Bureau of Economic Analysis, recorded its biggest rise in five years in April 2016. Consumer spending rose by 1.0% and is expected to put pressure on the Fed (Federal Reserve) to raise interest rates. Core personal consumption expenditure rose by 0.2%, as compared to the previous month’s rise of 0.1%. Personal income also rose by 0.4%, which was in line with forecasts.

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Chicago PMI and Consumer Confidence Index disappoint

The Conference Board published the Consumer Confidence Index for May on May 31, 2016. The index came in at 92.6, which was well below the forecast of 96.1. It was also below the previous month’s figure of 94.7. The Chicago PMI (purchasing managers’ index), published by ISM (Institute for Supply Management), was also disappointing, as it fell below the 50 mark. The PMI came in at 49.3, as compared to the forecast of 50.8. The PMI fell 1.1 points from the previous month.

Impact on ETFs

The SPDR S&P 500 ETF (SPY) fell by 0.19%, and the SPDR S&P MidCap 400 ETF (MDY) fell slightly by 0.06%.

The SPDR S&P Retail ETF (XRT), a retail sector fund, rose slightly by 0.02%. The Consumer Staples Select Sector SPDR Fund (XLP) was among the major losers for the day as it fell 0.64%. The SPDR S&P Metals & Mining ETF (XME) was among the major gainers for the day with a rise of 3.5%.

In the next part of this series, we’ll look at housing data from Australia, New Zealand, and Japan.

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