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4 Safe Stocks to Invest in as Consumer Spending Declines
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U.S. personal income increased in May but consumer spending slowed, indicating that consumers are still uncertain about the economy’s health. This comes despite upbeat economic data on the labor and housing market in June.
The Bureau of Economic Analysis said on Jun 30 that personal income rose 0.4% or $91.2 billion in May. Disposable personal income, which excluded personal taxes, also rose 0.4% or $86.7 billion, in May.
However, personal consumption expenditure (PCE) increased a modest 0.1% or $18.9 billion in May. Real personal consumption expenditure declined marginally.
Although personal income has been on the rise, thanks to a resilient labor market that has seen solid job additions to the economy almost every month and steady growth in wages, consumers have been spending cautiously.
Breaking down the $18.9 billion consumer spending in May, $5.2 billion was spent on services led by a surge in spending on healthcare. However, the growth was offset primarily by a $33.1 billion decline in spending on goods.
On the other hand, the savings rate jumped to 4.6% in May from April’s rise of 4.3%.
Although inflation has started showing signs of easing, it is still elevated and a lot higher than the Fed’s target level of 2%. Understandably, consumers are unsure about the Fed’s future course of action as it has indicated two more rate hikes of 25 basis points each by the end of this year.
Market participants believe that the first of the hikes could be implemented as soon as July. This has once again made consumers concerned, leading them to save more and cut down on spending. However, it is difficult to cut down on spending on necessities as they are everyday items.
Given this situation, it would be ideal to invest in consumer staple stocks. The consumer staples sector is known for its stability and resilience, as consumer demand for essential goods tends to remain consistent regardless of economic fluctuations. These companies provide products that are considered everyday necessities, making the sector defensive in nature.
Our Choices
The non-cyclical nature of these stocks protects them from the market's vagaries. Moreover, they pay dividends, which is a testament to their robust financial health, consistent earnings generation and ability to withstand market fluctuations.
Kimberly-Clark Corporation (KMB - Free Report) is principally engaged in the manufacture and marketing of a wide range of consumer products around the world. KMB sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, retail outlets, manufacturing, lodging, office building, food service, health care establishments, and high-volume public facilities.
Kimberly-Clark has an expected earnings growth rate of 10.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. KMB presently has a Zacks Rank #2 (Buy). Kimberly-Clark has a current dividend yield of 3.42%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingredion Incorporated (INGR - Free Report) is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
Ingredion’s expected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the past 60 days. INGR has a dividend yield of 2.68%. Ingredion carries a Zacks Rank #1.
Lamb Weston Holdings, Inc. (LW - Free Report) is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.
Lamb Weston’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. LW currently has a Zacks Rank #2. Lamb Weston has a current dividend yield of 0.97%.
McCormick & Company, Incorporated (MKC - Free Report) is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry across the entire globe. MKC’s key sales, distribution and production facilities are located in North America and Europe.
McCormick & Company’s expected earnings growth rate for the current year is 4.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. MKC currently has a Zacks Rank #2. McCormick & Companyhas a current dividend yield of 1.79%.
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4 Safe Stocks to Invest in as Consumer Spending Declines
U.S. personal income increased in May but consumer spending slowed, indicating that consumers are still uncertain about the economy’s health. This comes despite upbeat economic data on the labor and housing market in June.
The Bureau of Economic Analysis said on Jun 30 that personal income rose 0.4% or $91.2 billion in May. Disposable personal income, which excluded personal taxes, also rose 0.4% or $86.7 billion, in May.
However, personal consumption expenditure (PCE) increased a modest 0.1% or $18.9 billion in May. Real personal consumption expenditure declined marginally.
Although personal income has been on the rise, thanks to a resilient labor market that has seen solid job additions to the economy almost every month and steady growth in wages, consumers have been spending cautiously.
Breaking down the $18.9 billion consumer spending in May, $5.2 billion was spent on services led by a surge in spending on healthcare. However, the growth was offset primarily by a $33.1 billion decline in spending on goods.
On the other hand, the savings rate jumped to 4.6% in May from April’s rise of 4.3%.
Although inflation has started showing signs of easing, it is still elevated and a lot higher than the Fed’s target level of 2%. Understandably, consumers are unsure about the Fed’s future course of action as it has indicated two more rate hikes of 25 basis points each by the end of this year.
Market participants believe that the first of the hikes could be implemented as soon as July. This has once again made consumers concerned, leading them to save more and cut down on spending. However, it is difficult to cut down on spending on necessities as they are everyday items.
Given this situation, it would be ideal to invest in consumer staple stocks. The consumer staples sector is known for its stability and resilience, as consumer demand for essential goods tends to remain consistent regardless of economic fluctuations. These companies provide products that are considered everyday necessities, making the sector defensive in nature.
Our Choices
The non-cyclical nature of these stocks protects them from the market's vagaries. Moreover, they pay dividends, which is a testament to their robust financial health, consistent earnings generation and ability to withstand market fluctuations.
Kimberly-Clark Corporation (KMB - Free Report) is principally engaged in the manufacture and marketing of a wide range of consumer products around the world. KMB sells its products to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, retail outlets, manufacturing, lodging, office building, food service, health care establishments, and high-volume public facilities.
Kimberly-Clark has an expected earnings growth rate of 10.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. KMB presently has a Zacks Rank #2 (Buy). Kimberly-Clark has a current dividend yield of 3.42%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingredion Incorporated (INGR - Free Report) is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
Ingredion’s expected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the past 60 days. INGR has a dividend yield of 2.68%. Ingredion carries a Zacks Rank #1.
Lamb Weston Holdings, Inc. (LW - Free Report) is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.
Lamb Weston’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. LW currently has a Zacks Rank #2. Lamb Weston has a current dividend yield of 0.97%.
McCormick & Company, Incorporated (MKC - Free Report) is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry across the entire globe. MKC’s key sales, distribution and production facilities are located in North America and Europe.
McCormick & Company’s expected earnings growth rate for the current year is 4.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. MKC currently has a Zacks Rank #2. McCormick & Companyhas a current dividend yield of 1.79%.