US Consumer Riding High

• Economic slowing may be offset by its secondary effects — lower energy costs and interest rates.
• Facts about consumer behavior could justify optimism about US growth.
• US consumers alone represent the biggest economy in the world.

While I was traveling in Michigan and Minnesota last week, several things became apparent to me. Concerns about the economic slowdown in China and the rest of the world are real, but I also saw signs that these fears may be overpowered by a true sense of life improving in the United States.

What Really Matters

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As long-term investors, we focus on the economic or business cycle. The drivers that determine when the cycle begins and ends matter more to us at MFS than near-term market fluctuations.

Rising Fortunes of US Consumers

The latest reports on retail sales have been disappointing.
But I’m still optimistic about the health of US consumers.
I expect consumer spending to sustain this business cycle.

During the first quarter of 2015, the list of economic worries has been long — slow business investment, subpar production growth in many sectors, weaker trade and central bank–driven currency dislocations, just to name a few. On top of that, financial pundits have been writing off US consumers, repeatedly describing them as overstretched, hobbled by low wages and too much debt, and discouraged about job prospects.

Pulled Apart or Pushed Ahead?

There may be things to worry about, but there’s also good news.
In my view, the global economy is not being pulled apart in 2015.
Low energy prices, interest rates and inflation could push the world ahead.

At the beginning of 2015, the worry machines of the world are working full time. We hear that China is a bubble, Japan cannot be fixed, Europe is a mess again and the United States is showing signs of slowing.

There may be some truth in all this, but there are other truths that we should also consider.