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Consumer Savings at One-Year High: ETFs to Buy

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U.S. consumers have been able to increase savings even as they increased spending. The saving rate rose to 4.7% in January, the highest in a year, from 4.5% in December. "Households are drawing down excess savings at a slower rate than before, likely due to recession concerns," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, as quoted on Reuters.

Personal income rose a strong 0.6%, majority of which originates from strong wage growth. Income at the disposal of households after adjusting for inflation jumped 1.4%, the largest uptick since March 2021. Disposable income was also improved by a 7.9% decline in tax payments.

In January, Consumers purchases of long-lasting manufactured goods like motor vehicles, household furnishings and equipment, clothes as well as recreational goods and vehicles more. Spending on goods outlays recovered to 2.8% increment.

Outlays on services was also solid as it rose 1.3%. Americans’ visits at restaurants and bars were quire frequent. Consumers spent on healthcare, recreation and transportation services too. All these numbers along with higher savings indicates that consumers will continue to shell out (though cautiously) in the coming months as well. Rising wages would also make this possible.

U.S. retailer Walmart (WMT - Free Report) announced plans to hike its average hourly pay to more than $17.50, making the range now $14 to $19 per hour. Home Depot’s (HD - Free Report) Q4 earnings results revealed that the company announced an extra $1 billion investment in wage increases. This investment makes the starting wage in every U.S. market to at least $15 an hour.

Pluss jobs market has been strong. In January, the retail industry added 30,000 jobs, while the unemployment rate remained low, at 3.4%, far lower than the January 2021 rate of nearly 6.5%. Against this backdrop, below we highlight a few ETFs that appear to be good picks right now.

ETFs in Focus

Home Furnishings – iShares U.S. Consumer Focused ETF (IEDI - Free Report)

The iShares U.S. Consumer Focused ETF seeks to provide access to U.S. companies with discretionary spending exposure while targeting increased exposure to U.S. firms with a greater proportion of consumer spending and consumer goods and service production in the United States. Home Depot is he top holding in the fund with about 11.26% exposure, followed by Amazon (8.43%) and Lowes Companies Inc (4.93%).

RestaurantsAdvisorShares Restaurant ETF (EATZ - Free Report)

The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business. The fund charges 99 bps in fees.

ClothingSPDR S&P Retail ETF (XRT - Free Report)

The fund, before expenses, the total return performance of the S&P Retail Select Industry Index. Apparel retail takes about 20.39% of the fund. Automotive retail too takes about 21.1% of the fund.

Broader Exposure – Invesco DWA Consumer Cyclicals Momentum ETF (PEZ - Free Report)

The underlying Dorsey Wright Consumer Cyclicals Technical Leaders Index identifies companies that are showing relative strength. Specialty retail takes about 45.28%, followed by Hotels (16.0%), Apparel (7.4%) and Health care providers (7.1%).


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