Late last week, I described Americans as a “gloomy” bunch. On Tuesday, The Conference Board said the same, or at least about consumers’ outlook.
Although the headline confidence index beat estimates for May at 102.3, the expectations gauge is still indicative of recession.
At 71.5, the forward-looking index of consumers’ outlook for the economy and their own finances has loitered below 80 for 14 of the last 15 months. That level (80) typically presages a downturn within a year.
Tuesday’s release came on the heels of a very subdued final read on University of Michigan sentiment for this month. Both surveys were obviously conducted prior to the conclusion of debt ceiling negotiations between Kevin McCarthy and Joe Biden. Michigan survey director Joanne Hsu noted that May’s sour consumer mood “mirror[ed] the 2011 debt ceiling crisis, during which sentiment also plunged.”
That said, it’s far from obvious that Americans would be feeling much better about things in the absence of D.C. gridlock. Persistently elevated inflation and concerns around a possible recession are the key factors weighing down sentiment. In other words: Americans are worried about stagflation. The Fed is likewise concerned, even if officials are loath to join staff in projecting a recession.
“[Consumers’] assessment of current employment conditions saw significant deterioration,” Ataman Ozyildirim, Senior Director at The Conference Board, said, adding that inflation expectations, while elevated, were at least “stable” this month. Consumers in The Conference Board survey expect inflation to average 6.1% over the next 12 months. The high was near 8% last year. Year-ahead expectations in the Michigan poll fell to 4.2% in May, but longer-term views worsened.
Of course, softening views on the labor market are a sign of progress in the current environment, so the narrowest labor differential in 25 months was one bright spot from The Conference Board’s report, albeit not something with the potential to move any needles (or markets). That’s a “bad news is good news” kind of deal: If jobs are getting less plentiful, or are perceived as harder to get, the read-through is cooler inflation from less aggressive wage growth.
In any case, the first of this week’s data deluge in the US was best described as “Nothing to see here.”
The place where I’ve noted some “green sprouts” of resentment starting to appear is in online rants about businesses of all types trying to solicit tips. No one seems anxious to blame the workers. A more common question is “why don’t the business owners simply pay their staff more?” (A good question when business owners concurrently whine about how hard it is to find and retain workers.)
Just wait until we hear that tips are being requested when you fill your tank at a self-service gas station!!
It’s disinflation folks! Look at real time data. The fomc needs to end qt, and pause rate hikes. Pretty soon we will be seeing cpi trending below 3%. The market smells it as well. China weak growth. Europe weak growth. USA is next.
What RT data are you watching?
Are tips included in CPI? I can’t find the answer.
I am not finding any data series tracking tips, but various media report that in 3Q22 tips at full service restaurants grew +25% and at counter service +17% (citing POS data from Square).
I’d wager the Square numbers for counter service tips will have been even higher in Q4 ’22 and Q3 23 as more and more venues added it to their electronic payment screens. It’s way more effective than a top jar.