Two macro factors are spurring the U.S. consumer sector, says Michael Orndorff.

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These are:

1. A shrinking unemployment rate, which means “employment growth is reasonably constructive in the U.S.”

2. Growing support for a minimum wage increase.

So, “our outlook for the U.S. consumer is still constructive,” says Orndorff, vice president and portfolio manager at American Century Investments in Kansas City, Missouri. He co-manages the Renaissance U.S. Equity Growth Fund.

Read: What’s boosting the U.S. consumer sector?

In fact, “one of the frequent questions we’ve been asking over the last several months as we’ve met with the management teams of our holdings, and potential holdings, is: ‘What are they saying in terms of wage growth?’ And there definitely is an upward bias to wages.”

One company that has increased employee compensation is FedEx, says Orndorff. “They had deferred incentive compensation for a number of years, but they’ve reinstated that for their employees.”

And, other retail companies are also voicing support for higher pay for minimum-wage employees. But, he adds, “I think it may take a while, ultimately, to show up in some of the government numbers.”

Read: U.S. Fed continues to hold on rate hike

However, even if minimum wage is increased, Orndorff doesn’t anticipate U.S. consumers will spend more. “When consumers have more income in their pockets, they’re still very rational. There’s this lingering effect from the financial crisis in the U.S., [so] consumers are paying down debt and increasing saving rates,” rather than immediately spending more.

He predicts, “We’d also need higher asset prices in the form of houses, to further accelerate consumer spend levels.”

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The most recent data on the U.S. consumer came from a Visa mid-quarter poll, says Orndorff, which found spending was steady throughout Q1 and Q2. “So [spending] has neither accelerated nor decelerated. It seems like we’re on a path of steady growth, but not [at] some major inflection point.”


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