Another day, another reminder that a US recession is just around the corner. Allegedly.
I’m not sure how much utility there is in mentioning the latest read on the Conference Board’s consumer confidence index, but in the interest of being thorough, I’ll briefly note that the headline gauge did move lower in April, suggesting, perhaps, that the bank failures took a psychological toll.
At 101.3, the headline index was the lowest since July. It’s been a meandering affair for months. Suffice to say Americans are a bit apathetic at this point. Consensus, for whatever it’s worth (nothing), was 104.
The survey was conducted from April 3, so America’s analytical masses had plenty of time to scrutinize the Fed’s H.8 releases for clues about the severity of regional banking stress and the impact on lending. (I’m just joking.)
The expectations gauge deteriorated to 68.1. 80 is the threshold associated with a recession over the ensuing 12 months. The expectations index has been below that level since early last year, with but a single exception. So, add that to the long list of recession indicators.
Inflation expectations were mostly unchanged, but are still very elevated (6.2% on a one-year horizon). Buying intentions for things that cost a lot (houses, cars and durables) receded, “a signal that consumers may be economizing amid growing pessimism,” as Conference Board director Ataman Ozyildirim put it.
The combination of a robust read on new home sales for March and the weakest Conference Board print since last summer was yet another example of conflicting signals, cross currents and generalized macro ambiguity.
Commenting on Tuesday’s US housing numbers, which included an update on the national price indexes, ING’s James Knightley noted that “with house price-to-income ratios above where we were at the peak of the 2006 housing bubble, the affordability metrics continue to point to downside risks for transactions and prices.” In the event of a hard landing and rising unemployment, “this would threaten a rise in default rates and an increase in the supply of homes for sale [while] falling property prices at a time when construction costs and labor remain elevated also means squeezed profit margins, which is another disincentive for construction,” he added.
As for the consumer, this is a muddle through period. The entire country is waiting on a downturn that never seems to come. The Fed is too, just without saying it. As Knightley alluded to, the key is the labor market. As long as employers are still hiring and wage growth is running hot, it’s difficult to see a path to the recession some believe is necessary to bring inflation back down to levels we can at least live with.
Panning out to the global view, JPMorgan said Monday that Q1 was very strong in aggregate. “We project the US and China to decelerate this quarter, slowing global growth to a trend-like pace, but with the notable exception of the recent rise in [US] jobless claims, there is little in the data pointing to outright weakness ahead,” the bank remarked.
How about a little more concrete data to throw into the pot?
https://www.freightwaves.com/news/box-shipment-trends-their-worst-since-depths-of-great-financial-crisis
Derek, thanks for sharing the US box demand trend data. Very telling! (at least on the goods side of the economy)
I never have more to contribute than anecdotes, but my own business is certainly feeling like a downturn is happening. I’m hearing the same from other liquor stores in the North Jersey area, and when this business is slow, something is generally amiss. Granted, the booze business isn’t ‘recession proof’ as some like to think, but we are typically recession-resistant. But since start of the year, we’re down versus last year and continually creeping lower. Alternately, the on-premise (service) side of the business is apparently doing well, though it sounds like even that is starting to show signs of cracking.
For my part, I’m finally doing what I should have done 6 months ago: I’m raising prices almost across the board. And one more tight month will mean layoffs, too, something I’ve never considered in 5 years and will still be a last resort.
Thanks NY Jeff. Anecdotes aren’t data, but it was anecdotes like visits to some housing developments whose mortgages were all wrapped up in derivatives that helped lead to the Big Short.