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Consumer Spending, Personal Income Rise: 5 Solid Picks

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U.S. consumer spending increased in August, indicating that people are slowly getting their confidence back with the economic reopening. This comes despite a surge in the Delta variant of the COVID-19 virus, which proves that it hasn’t dented their spirits much.

Also, personal income increased in August. Although the pace is slower than it was in July, it justifies the spending. With the vaccination drive in full swing and higher income, people are more confident and spending at ease.

Consumer Spending Jumps

The Commerce Department said on Oct 1 that U.S. consumer spending rose 0.8% in August after a revised 0.1% decline in July. Moreover, it came in higher than economists’ expectations of 0.8% compared with the 0.3% rise originally reported for July.

Consumer spending accounts for more than two-thirds of U.S. economic activity. Spending on goods rose 1.2% in August, driven by higher spending on hotels and restaurants, and recreational items. Spending on services rose 0.6% in August, driven by spending on utilities and housing.

However, spending on services slowed down a bit in August after increasing 1.1% in July. Spending had shifted from goods to services but the recent jump in coronavirus cases has somewhat slowed down demand for air travel.

Economy on Solid Ground

The pace of growth might have been unsettled lately but the foundation for economic recovery seems to be solid given that personal income too has been on the rise. Personal income rose 0.2% in August, the Commerce Department reported. Although this is lower than July’s rise of 1.1%, people are a lot more confident now and are spending at ease.

Besides, wages and salaries have also been on the rise. In August, wages and salaries increased 0.5%, which boosted income and the power to spend.

With more people vaccinated now, they are also far more confident. Hiring is at multi-year highs, which indicates that people are regaining their jobs.

Given this situation, consumer discretionary stocks seem to be an ideal sector to invest in. The Consumer Discretionary Select Sector SPDR (XLY) has returned 21.4% in the past year.

Our Choices

We have picked five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are poised to benefit in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

Party City Holdco Inc. (PRTY - Free Report) is involved in the design, manufacture and contracts for manufacturing and distribution of party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 11.3% over the past 60 days. Party City has a Zacks Rank #2.

Lifetime Brands, Inc. (LCUT - Free Report) is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantryware & spices, tabletop and bath accessories.

The company’s expected earnings growth rate for the current year is 46.3%. The Zacks Consensus Estimate for current-year earnings improved 6.1% over the past 60 days. The company carries a Zacks Rank #1.

YETI Holdings, Inc. (YETI - Free Report) designs, markets and distributes products for the outdoor and recreation market under the YETI brand primarily in the United States. The company's products are designed for use in outdoor activities, including hunting, fishing, camping, barbecue, and farm and ranch activities,among others. 

The company’s expected earnings growth rate for the current year is 32.6%. The Zacks Consensus Estimate for current-year earnings improved 18.1% over the past 60 days. The company has a Zacks Rank #1.

Mastercraft Boat Holdings, Inc. (MCFT - Free Report) designs, manufactures and markets recreational powerboats through its subsidiaries. The company's operating segment consists of MasterCraft and NauticStar.

The company’s expected earnings growth rate for the current year is 18.7%. The Zacks Consensus Estimate for current-year earnings improved 12.6% over the past 60 days. Mastercraft Boat carries a Zacks Rank #2.

Acushnet Holdings Corp. (GOLF - Free Report) designs, develops, manufactures and distributes golf products. The company's operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear. Acushnet Holdings Corp.

The company’s expected earnings growth rate for the current year is 75.8%. The Zacks Consensus Estimate for current-year earnings improved 11.9% over the past 60 days. Mastercraft Boat carries a Zacks Rank #2.