“The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession”, Richard Curtin, director of the University of Michigan consumer survey, said in a statement Friday, offering up a rather amusing explanation for why consumer sentiment just posted its second-worst print of Donald Trump’s presidency.
The preliminary read on the gauge for August fell to 92.1 from 98.4 in July.
That’s the lowest level since January, and it missed all estimates. Consensus was looking for 97. The low end of the range was 94.4.
“Consumers concluded, following the Fed’s lead, that they may need to adopt a precautionary spending outlook in anticipation of a potential recession”, Curtin went on to muse.
And that, ladies and gentlemen, is a testament to something we said on Thursday evening while documenting the president’s reportedly panicked attitude when it comes to recent market volatility and a modest downshift in the economy. To wit, from “Trump ‘Rattled’ Amid Market Chaos, Is Calling Business Leaders About Economy“:
Broadly speaking, the data continues to paint a picture of a solid US economy. Indeed, if there’s anyone who is stoking a panic, it’s Trump, with his incessant demands for rate cuts. Just Thursday, for instance, retail sales and manufacturing data came in solid, but [Peter] Navarro showed up again on Fox Business to call for rate cuts. “The point of a rate cut is not to stave off recession but to make a strong economy stronger”, Navarro said.
The constant drumbeat of rate cut calls from Trump, Navarro and Larry Kudlow are spooking folks, both on Wall Street and on Main Street. If the Fed “tightened us into a slowdown” in Q4 2018, Trump is “talking us” into another one in Q3 2019.
This could risk becoming a self-fulfilling prophecy. If consumers get scared, they might stop spending at a time when retail sales just logged a fifth consecutive monthly gain and following a second quarter during which personal consumption, the engine of the US economic machine, shouldered most of the burden.
In other words, Trump’s Fed criticism risks turning into something of a tragicomedy if he ends up derailing an economy that, as Jerome Powell has repeatedly reminded the president, is doing fine on its own.
Other details from the consumer sentiment report include a drop in the current economic conditions index to 107.4 from 110.7 last month and a decline in the expectations gauge to 82.3 from 90.5.
Of course, the truly absurd part of this situation is that the White House will not be able to discern their own role. Rather, as the cracks start to show, the administration will simply double and triple down on calls for rate cuts, which have the potential not only to scare consumers away, but also to make it even more difficult for the Fed to live up to the bond market’s lofty expectations for policy.
Trump is going to stroke if the Fed appeases him on the rate cut, and the markets consider it a worrisome sign. Be careful what you ask for.
Well over a year ago, many people knew the trump economy was fake — and now, a year later, it’s just more chaotic and sentiment has nowhere to go but down. As the trump/GOP circus races down a path of stupidity, the main outcome might well be that a few of the highly mediocre Democrats that had no chance to be elected, will in fact make a difference n the way people perceive trump and their gut feelings on how to move forward.
==> “Like a negative swap spread then, an extremely low unemployment rate that produces no wage inflation (at the point it happens let alone across several years) is similarly meaningful nonsense that points us in the direction of causation. Unlike swap spreads, the mystery of the unemployment rate is easily untangled; it applies to the official count of the employed as a percent of the official count of the labor force. If the latter is not comprehensive, neither can be the unemployment rate.
Therefore, a rate that signifies “full employment” but without the inflationary corroboration of that actual condition is instead describing an economy that shrunk apart from official acknowledgement. Ever since the mass layoffs in late 2008, economists have been telling us that those people outside the labor force don’t matter, at the very least for interpretation. But if you have to so fool yourself into rejecting what is a matter of pure common sense, then your position really is nonsense.
We have interest rates that don’t go up apart from brief but diminishing bursts despite the Federal Reserve’s “rate hikes”, an oil futures curve that after three years remains in contango, an interest rate swap paradigm declaring permanent nonsense, and an unemployment rate doing the same. None of these are trivial concerns, instead speaking directly about the real physical world behind the façade of mainstream description. Improving or healthy are economic qualifiers that would in the future only start to apply where all these imbalances have finally dissipated and disappeared for good.”
.
http://www.alhambrapartners.com/2017/05/30/the-real-signs-that-matter/
https://fred.stlouisfed.org/series/UMCSENT
Chart updated through June
Consumer sentiment is a leading indicator but the lead is so short that it’s almost a coincident indicator.
A 6 point decline isn’t that uncommon and 92 is still high.