US consumers are concerned about inflation. We know that. It’s well documented.
The question going forward is whether (and to what extent) that consternation weighs on confidence or is offset by “excess savings” and an overriding desire to “revenge spend.”
As a quick aside, I don’t particularly care for the idea of “revenge spending.” It reminds me of what I consider to be the tragically misguided notion that nations plagued by terrorism should encourage citizens to go about their daily lives as though the threat of suicide bombings isn’t real on the patently ridiculous notion that terrorists will be discouraged by the resiliency of an “unafraid” public. A deadly virus can’t be “demoralized” by a robust consumer. COVID doesn’t get down on itself when retail sales come in hot or when people crowd into bars.
In any event, consumer confidence came in ahead of expectations for July on the Conference Board’s gauge. The 129.1 headline print was up from June (figure below) and easily better than the 123.8 the market expected.
The present situation gauge rose slightly, while the expectations index ticked lower. The headline index touched the highest of the pandemic era last month. The labor differential rose to 44.4, another decade-plus high.
“Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said Tuesday. (And here I thought the country was “going to hell” after the election — the nice man in the red hat told me so.)
“Short-term inflation expectations eased slightly but remained elevated [while] spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months,” Franco added, on the way to suggesting that consumer spending “should continue to support robust economic growth in the second half of 2021.”
I suppose it’s worth pausing briefly to reflect (again) on the figure (below), which just shows that retail sales long ago surpassed pre-pandemic levels.
Meanwhile, durable goods came in soft in Tuesday’s other ostensibly notable data release. Orders rose 0.8% in June, below the 2.2% gain consensus expected. That said, May was revised markedly higher (to a 3.2% gain from a 2.3% advance). Core orders rose 0.5%, the same as the previous month, but shipments missed, printing a 0.6% gain against 0.8% consensus. With GDP on deck (i.e., given the proximity of the aggregate) no one cared.
Because it’s obligatory, I’ll update everyone’s favorite “chart crime” (below).
That’s all I’ve got for you on this one.
Great stuff as always. Minor, but ex-transp orders were up 0.3% (same as previous month unrevised, but May was revised up to 0.5%).
I have been worried about inflation since graduating from college. For every dollar that I spent that year, I now need $2.73.
Seems bad, but in reality, a relatively low inflation period.
Since the year that I was born, the USD has lost 91% of its value. (I am a child of the 1960’s). Yikes! Public education used to be the ticket to put a person on track to beat inflation but now, our public education is terrible and it costs A LOT of money to privately educate kids (or a parent, most likely a stay home parent, devoted to the cause).
And that was prior to the Fed printing in earnest. It does seem prudent to get rid of the step up in basis, upon death. Sure, raise taxes on the super wealthy- but my fear is that the middle class will get clobbered and the US will turn into France.
Turn into France? You wish…
Look, I’m not here to pick a fight but, unless you’ve lived there or have researched the place, don’t make silly national comparisons. I can kind of get behind excessive hyperbolic ones, if funny – “we’ll turn into Zimbabwe/Weimar Germany” as a way to say “I’m worried about inflation”… but France has a pretty strong middle class and devote lots of resources to maintaining a quality education system where one doesn’t have to go broke to get his/her kid through college. Maths skill (and determination) are the two main requirements for succeeding in the French educational system.
Is France great? Not necessarily. I generally prefer working for Anglo-Saxon companies, tbh. Less politics/sucking up and bitching/back stabbing is my general take away.
I’m generally a demand side guy but I do think France would benefit from a few choice supply sided reform. It tends to go wrong because politicians insist on “deregulating the labour market”, which French workers correctly interpret as “taking away the social safety net”. IMHO, politicians would be better served by starting with reducing the regulatory burden on small and medium companies first and move to the labor market afterwards.
Anyhow – don’t worry too much about France. It’s far from perfect but, unless you’re upper upper middle class and above, life there is a lot better than life in the USA.
Revenge spending – IMHO, the comparison with the “we will not be afraid” is not quite accurate. I don’t think it means we’re avenging ourselves against the virus (that’s indeed silly), it means we’re spending aggressively to proclaim we’re still alive/we’ve escaped death by this virus.
Celebratory spending would maybe be more accurate but it doesn’t capture a certain grimness still with us and the general fucked up state of our society. It kind of be unfair/incorrect to compare it to post WWII spending where true victory and a shared social contract made the spending probably truly joyous.
So, yeah, revenge is more about us than about the virus. Spending of despair, maybe? (to mirror “deaths of despair”)