United States
The preliminary UoM consumer confidence index for June fell 2 pts to 93.1 vs the expectation of 95. This is at the lowest level since October when it printed 87.2 and vs September at 91.2. The November election jump took it to 93.8. The components however were mixed as Current Conditions rose .7 pts to 113.2 which matches the highest level since July 2005 but was more than offset by a 3.7 drop in the Expectations component to 80.2, the lowest since October and is now below the 2016 average of 81.8. One year inflation expectations did rise one tenth to 2.7% and matches the highest since April 2016. Consumers don’t get to hedonically adjust their cost of living.
Positively, those expecting Higher Income rose 2 pts to 40 which matches the best level since 2000. The set up is clearly here for an aggregate rise in wages. We’re certainly seeing it on the high end of the skills scale and on the lower end triggered by higher minimum wages along with in certain industries such as construction. The negative though was the higher income expectations did nothing to help the feelings about one’s household finances which fell. Also, employment expectations fell 10 pts to match the lowest level in a year. Those expecting better business was up by 2 pts but the expectations component fell by 7 pts to the weakest level since August 2014.
There were mixed answers with buying intentions. Those that said it’s a good time to buy a car/truck fell 6 pts to match the weakest level since August 2014. Those that said it’s a good time to buy a home was up by 4 pts to 147. It peaked post election at 156. Those that said it’s a good time to sell a house was up by 3 pts and is just 3 pts from the highest level since 2005. Those who plan to buy a major household item was up 2 pts after falling by 3 pts in June.
The UoM said this,
“the data indicate that hopes for a prolonged period of 3% GDP growth sparked by Trump’s victory have largely vanished, aside from a temporary snap back expected in Q2. The declines recorded are now consistent with just above 2% GDP growth in 2017.”
Of note on the political front,
“The weakness in the Expectations Index in early July was concentrated among Republicans (falling to 108.9 from June’s 116 and February’s 120.1); Democrats continue to hold much less favorable expectations, although the Expectations index among Democrats has markedly improved.”
Bottom line, consumers feel good today but are more uneasy about the future. What is clear is that the post election confidence indicators that all initially spiked have since come back down to earth and economic growth has not changed at all and in some areas has weakened (auto’s and retail sales elsewhere).
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Business inventories in May rose .3% m/o/m as expected after falling by .2% in April. Of note in May, inventories in the auto space at the retail level continued to grow with a 1.1% m/o/m and 7.5% y/o/y rise. As overall sales fell .2%, the inventory to sales ratio ticked up to 1.38, the highest since November. This data should not alter GDP forecasts. The Atlanta Fed will next update their Q2 GDP estimate today from the last read of 2.6%. The NY Fed’s estimate is currently at 2%.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.