If the consumer is dead then someone forgot to tell Consumer Discretionary companies, who are making more money than ever before selling life’s luxuries and conveniences.
Just look at the dotted line below in a chart from Citi’s Steven Wieting. Consumer Discretionary stocks are making the most money ever… but off of lower sales (in light blue). Sales actually haven’t grown over the last five years.
Meanwhile, Consumer Staples companies, ie. those who make things we need, are still making far less income than they did pre-crisis:
Of all the major S&P 500 sectors, information technology is the only other sector, beyond consumer discretionary, earning more than it did pre-crisis according to data from Steven Wieting.
The above dichotomy is truly an odd situation for a period when many economic observers are waiting for the average U.S. consumer to recover. But perhaps it’s less strange than it seems, and indicative of the fact that top 10% of American earners capture half of all income, and the top 20% account for 60% of all consumer spending according to the Wall Street Journal. Many consumer companies don’t really need the average American, since they tap the wealthiest upper crust.
(Charts via Citi, Steven Wieting, 4 October 2010)
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