American consumers were more willing to open their wallets in September, an encouraging sign of what Santa might bring for investors this year. According to the latest Bureau of Economic Analysis (BEA) data, consumer spending in the U.S. rose a robust 1 percent between August and September, the largest month-to-month gain since 2009.

For investors, I think this news bodes well for the consumer discretionary sector as we head toward the busy holiday shopping season, already expected to be strong  compared to last year’s.

 

 

In its report, the BEA notes that consumption was driven primarily by new automobile sales and household utilities. Americans drove an impressive 18.5 million autos and light trucks off car lots in September, up 4.7 percent from a year earlier. Contributing to this, it must be pointed out, was the loss of an estimated 1 million vehicles as a result of Hurricanes Harvey and Irma.

Among the companies whose stock appreciated following the two devastating storms was Copart (CPRT), a preowned vehicle auctioneer. The company has yet to report sales figures for the third quarter—which includes the period when Harvey and Irma struck the U.S.—but its July quarter saw attractive top and bottom growth year-over-year, with sales up 14 percent.

Copart, which just celebrated its 35th anniversary, is one of the top holdings in our Holmes Macro Trends Fund (MEGAX).

 

Although the unusually high consumption rate partially reflected Americans’ need to replace vehicles and other durables in the wake of Harvey and Irma, total U.S. spending in September was also supported by rising household incomes and strengthening confidence in the U.S. economy.

According to the University of Michigan’s survey of U.S. households, consumer sentiment surged to 100.7 in October, up from 95.1 in September. This is the highest monthly level since 2004 and, amazingly, represents only the second time the survey has crossed above 100 since the end of the 1990s.

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