Tag Archive: consumer spending

Tax Cuts And (Less) Spending

After being rumored and talked about for over a year, at the end of last year the tax cuts were finally delivered. The idea had captured much market attention during that often anxious period of political flirtation. Prices would rise or fall by turn based on whether or not it seemed a realistic possibility.

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Bi-Weekly Economic Review: Oil, Interest Rates & Economic Growth

The yield on the 10 year Treasury note briefly surpassed the supposedly important 3% barrier and then….nothing. So, maybe, contrary to all the commentary that placed such importance on that level, it was just another line on a chart and the bond bear market fear mongering told us a lot about the commentators and not a lot about the market or the economy.

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The Retail Sales Shortage

Retail sales rose (seasonally adjusted) in March 2018 for the first time in four months. Related to last year’s big hurricanes and the distortions they produced, retail sales had surged in the three months following their immediate aftermath and now appear to be mean reverting toward what looks like the same weak pre-storm baseline. Exactly how far (or fast) won’t be known until subsequent months.

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Bi-Weekly Economic Review: Investing Is Not A Game of Perfect

The market volatility this year has been blamed on a lot of factors. The initial selloff was blamed on a hotter than expected wage number in the January employment report that supposedly sparked concerns about inflation – although a similar number this month wasn’t mentioned as a cause of last Friday’s selling. The unwinding of the short volatility trade exacerbated the situation and voila, 12% came off the market in a matter of days.

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Three Months Now of After-Harvey Retail Sales; or, The Boom Narrative Goes Boom

If indeed this inflation hysteria has passed, its peak was surely late January. Even the stock market liquidations that showed up at that time were classified under that narrative. The economy was so good, it was bad; the Fed would be forced by rapid economic acceleration to speed themselves up before that acceleration got out of hand in uncontrolled consumer price gains. On February 1, the Atlanta Fed’s GDPNow tracking model was moved up to...

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Retail Sales, Consumer Sentiment, And The Aftermath Of Hurricanes

Consumer confidence has been sky-high for some time now, with the major indices tracking various definitions of it at or just near highs not seen since the dot-com era. Economists place a lot of emphasis on confidence in all its forms, including that of consumers, and there is good reason for them to do so; or there was in the past.

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Retail Sales Bounce (Way) Too Much

Retail sales had a good month of November, or at least what counts as decent over the last five and a half years. Total retail sales (unadjusted) rose 6.35% last month, up from 4.9% (revised higher) in October. It was the highest rate of growth since the 29-day month of February 2016. For retailers, what matters is that it comes at the start of the Christmas shopping season.

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China Exports and Industrial Production: Revisiting Once More The True Worst Case

As weird as it may seem at first, the primary economic problem right now is that the global economy looks like it is growing again. There is no doubt that it continues on an upturn, but the mere fact that whatever economic statistic has a positive sign in front of it ends up being classified as some variant of strong. That’s how this works in mainstream analysis, this absence of any sort of gradation where if it’s negative it’s bad (though in 2015...

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Defining The Economy Through Payrolls

The year 2000 was a transition year in a lot of ways. Though Y2K amounted to mild mass hysteria, people did have to get used to writing the date with 20 in front of the year rather than 19. It was a new millennium (depending on your view of Year 0) that seemed to have started off under the best possible terms. Not only were stocks on fire at the outset, the economy was, too.

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Fading Black Friday

Black Friday was once the king of all shopping. A retailer could make its year up on that one day, often by gimmicking its way to insane single-day volume. Those days, however, are certainly over. Though the day after Thanksgiving still means a great deal, as the annual flood of viral consumer brawl videos demonstrate, it’s just not what it once was.

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Consumer Credit Both Accelerating and Decelerating Toward The Same Thing

Federal Reserve revisions to the Consumer Credit series have created some discontinuities in the data. Changes were applied cumulatively to December 2015 alone, rather than revising downward the whole data series prior to that month. The Fed therefore estimates $3.531 trillion in outstanding consumer credit (seasonally-adjusted) in November 2015, and then just $3.417 trillion the following month.

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Four Point One

The payroll report for October 2017 was still affected by the summer storms in Texas and Florida. That was expected. The Establishment Survey estimates for August and September were revised higher, the latter from a -33k to +18k. Most economists were expecting a huge gain in October to snapback from that hurricane number, but the latest headline was just +261k.

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The (Economic) Difference Between Stocks and Bonds

Real Personal Consumption Expenditures (PCE) rose 0.6% in September 2017 above August. That was the largest monthly increase (SAAR) in almost three years. Given that Real PCE declined month-over-month in August, it is reasonable to assume hurricane effects for both. Across the two months, Real PCE rose by a far more modest 0.5% total, or an annual rate of just 3.4%, only slightly greater the prevailing average.

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US Retail Sales: Retail Storms

Retail sales were added in September 2017 due to the hurricanes in Texas and Florida (and the other states less directly impacted). On a monthly, seasonally-adjusted basis, retail sales were up a sharp 1.7% from August. The vast majority of the gain, however, was in the shock jump in gasoline prices. Retail sales at gasoline stations rose nearly 6% month-over-month, so excluding those sales retail sales elsewhere gained a far more modest 0.6%.

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The Damage Started Months Before Harvey And Irma

Ahead of tomorrow’s payroll report the narrative is being set that it will be weak because of Harvey and Irma. Historically, major storms have had a negative effect on the labor market. Just as auto sales were up sharply in September very likely because of the hurricane(s) and could remain that way for several months, payrolls could be weak for the same reasons and the same timeframe.

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Incomes Are What Matters, So Bad Month, Bad Year, Bad Decade

Sometimes economics can be complicated, such as why the labor market has slowed in such lingering fashion since early 2015. Sometimes economics can be easy, such as why there is so much less to the economy this year than thought. The easy part relates to the hard part. The labor market slowed and so did national income. Though so much of official focus is on debt supplementation, it’s always, always about income.

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Expectations and Acceptance of Potential

The University of Michigan reports that consumer confidence in September slipped a little from August. Their Index of Consumer Sentiment registered 95.3 in the latest month, down from 96.8 in the prior one. Both of those readings are in line with confidence estimates going back to early 2014 when consumer sentiment supposedly surged.

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Retail Sales and the End of ‘Reflation’

There will be an irresistible urge to the make this about the weather, but more and more data shows it’s not any singular instance. Nor is it transitory. What does prove to be temporary time and again is the upside. The economy gets hit (by “dollar” events), bounces back a little, and then goes right back into the dumps. This, it seems, is the limited extent of cyclicality in these times.

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A Clear Anchor

All the way back in January I calculated the total size of China’s 2016 fiscal “stimulus.” Starting in January 2016, authorities conducted what was an enormous spending program. As it had twice before, the government directed increased “investment” from State-owned Enterprises (SOE). By my back-of-the-envelope numbers, the scale of this fiscal side program was about RMB 1.45 trillion, or nearly 2% of GDP

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2017 Is Two-Thirds Done And Still No Payroll Pickup

The payroll report for August 2017 thoroughly disappointed. The monthly change for the headline Establishment Survey was just +156k. The BLS also revised lower the headline estimate in each of the previous two months, estimating for July a gain of only +189k. The 6-month average, which matters more given the noisiness of the statistic, is just +160k or about the same as when the Federal Reserve contemplated starting a third round of QE back in 2012.

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