{"id":1584,"date":"2019-08-30T12:48:02","date_gmt":"2019-08-30T16:48:02","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1584"},"modified":"2019-08-30T12:48:02","modified_gmt":"2019-08-30T16:48:02","slug":"july-income-and-spending-and-august-consumer-sentiment","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1584","title":{"rendered":"July Income and Spending and August Consumer Sentiment"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Consumption: +0.6%; Disposable Income: +0.3%;\nPrices: +0.2%; Ex-Food and Energy: +0.2%\/ Sentiment: -8.6 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cHouseholds may have shopped in July, but\ndeclining savings and faltering confidence creates concerns about consumption\ngoing forward.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  They came, they saw, they bought.<\/em><\/strong>  Okay, it is not really a good idea to compare\nconsumers with Julius Caesar, but you get the picture.  Households were out there spending in\nJuly.  Indeed, they spent heavily on\neverything: Durables, nondurables and services. \nSo, why am I worried?  Income did not\nkeep up with spending.<\/em><\/strong>  Wages\nrose modestly,<\/em><\/strong> a problem I have discussed for quite a while.  Though that has not stopped people from\nspending up to this point, it may start restraining demand going forward.  Both the savings level and savings rate\ndropped to their lowest levels since November 2018.<\/em><\/strong>  Households are still saving at a decent pace,\nbut the\nreduction in total savings is a warning sign<\/em><\/strong>.  The kicker from the tax cuts may be\nfading.  And we will not have another\nAmazon and copycat sales by other retailers for a while.  As for inflation, it was moderate.  A jump in energy costs offset a decline in\nfood.  Both the overall Personal\nConsumption Expenditure index and the \u201ccore\u201d index remained in the 1.5% range,\nwhich is well below the Fed\u2019s 2% target.<\/em><\/strong><\/p>\n\n\n\n

A second reason for concern about consumer spending is\nthe sharp drop in the University of Michigan\u2019s Consumer Sentiment Index in\nAugust.<\/em><\/strong>  The decline was the largest since the end of\n2012.  Both components faded, but the\nexpectation decline was twice as large as the current conditions fall off.<\/em><\/strong>  It was noted that the key factor in the\nfaltering of household perceptions was the trade war.  As noted, \u201cCompared with those who did not reference tariffs, consumers who made\nspontaneous negative references to tariffs also voiced higher year-ahead\ninflation expectations, more frequently expected rising unemployment, and\nexpected smaller annual gains in household incomes\u201d.<\/em>  It should be pointed out that the\nConference Boards Consumer Confidence Index fell only modestly in August<\/em><\/strong>.  <\/p>\n\n\n\n

This week\u2019s numbers came out in drips and drabs and\nthey told differing stories.  Solid July\ndurable goods orders and capital spending, as well as a pick up in the Chicago Business\nBarometer points to a stabilization in the manufacturing sector.  But soft home prices and a decline in pending\nhome sales indicate the housing market is not getting any major boost from the\nlow interest rates. MARKETS AND FED POLICY IMPLICATIONS:<\/strong>Forecasting the economy is hard enough when\nyou only have to deal with trends in the economic numbers.  It is now clear that the overarching issue is\nthe trade war, which is a political strategy that has economic implications.<\/em><\/strong>  Since it is the president\u2019s policies (and\ntweets) that have to be determined first and then a probability placed on both\nthe magnitude and timing of the policies, it is clear that any forecast is\nlimited in its nature.  But economic\nforecasts are not limited in their value. \nForecasters have to make their own determinations of the factors just\nmentioned and then include those guesses into their models.  What we see is a growing belief that the war\nwill continue for an extended period and is likely to ramp up.  And that is leading to more and more\neconomists indicating that a recession within the next year is an expanding, if\nnot likely, outcome.<\/em><\/strong>  Of course,\non the other hand (hehe), a sudden end to the trade war would likely allow the\neconomy to continue growing, though maybe not at a very strong pace.  Still, up is better than down.  So, my suggestion is that the president should\nsimply declare victory and bring the troops home.\n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Consumption: +0.6%; Disposable Income: +0.3%; Prices: +0.2%; Ex-Food and Energy: +0.2%\/ Sentiment: -8.6 points IN A NUTSHELL:  \u201cHouseholds may have shopped in July, but declining savings and faltering confidence creates concerns about consumption going forward.\u201d WHAT IT MEANS:  They came, they saw, they bought.  Okay, it is not really a good idea to … Continue reading July Income and Spending and August Consumer Sentiment<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1584","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1584","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1584"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1584\/revisions"}],"predecessor-version":[{"id":1585,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1584\/revisions\/1585"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1584"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1584"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1584"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}