{"id":1760,"date":"2020-06-12T11:21:53","date_gmt":"2020-06-12T15:21:53","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1760"},"modified":"2020-06-12T11:21:53","modified_gmt":"2020-06-12T15:21:53","slug":"mid-june-consumer-sentiment-and-may-import-and-export-prices","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1760","title":{"rendered":"Mid-June Consumer Sentiment and May Import and Export Prices"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Sentiment: +9.1%; Current Conditions: +6.7%:\nExpectations: +10.9%\/ Import Prices: +1%; Fuel: +20.5%; Food: +2.2%; Exports:\n+0.5%; Farm:-0.5%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cHouseholds are feeling a little better about\nthe economy, but they are hardly exuberant.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  To get the economy really going, we need\nhouseholds to start spending a lot more. \nHow they feel about things will be the key factor<\/em><\/strong> in consumption\nand confidence is rising.  The\nUniversity of Michigan\u2019s Consumer Sentiment Index rose solidly in the first\npart of June. <\/em><\/strong> Households have\nseen the unemployment rate go down and they feel a little better about the\nlabor market.  That said, this is hardly a\n\u201chappy days are here again\u201d report.<\/em><\/strong> \nAs the statement noted: \u201c\u2026 few\nconsumers anticipate the reestablishment of favorable economic conditions\nanytime soon. Bad times financially in the economy as a whole during the year\nahead were still expected by two-thirds of all consumers, and a renewed\ndownturn was anticipated by nearly half over the longer term.\u201d<\/em>  While uncertainty about the future is\nbeginning to ease, it is still higher than it was at anytime during the Great\nRecession.<\/em><\/strong>  That raises questions\nabout the willingness to purchase big-ticket items.  If we don\u2019t see that happen, the recovery\nwill be slower than hoped for.<\/p>\n\n\n\n

As for inflation, import prices rose in May, but you\ncan chalk that up to the rebound in petroleum costs and the continued increase\nin food prices.  <\/em><\/strong>Crude petroleum led the way,\nrising by over thirty percent.  Food\ncosts were driven by jumps in meat and vegetable prices.  Excluding those two categories, the cost of\nforeign products entering the country fell slightly.<\/em><\/strong>  On the export side, the long-suffering farm\nsector took another hit as prices sold around the world declined again.<\/em><\/strong>\n They are now off by 3.5% since May\n2019.    <\/p>\n\n\n\n

IMPLICATIONS:<\/strong>  There is no reason that inflation should\nsurge, which is important as the Fed is embarking on flooding the economy with\nmassive amounts of liquidity.  <\/em><\/strong>The\nenergy price increases we have recently seen represent the ending of the price\nwar between Russia and Saudi Arabia. \nPrices should settle down now.  As\nfor food, eventually the supply chain will start catching up and while we may\nsee a few more months of elevated food cost increases, those should also move\nback toward more normal levels.  So\nthe Fed has a green light to do whatever it wants to do \u2013 and from Chair\nPowell\u2019s comments this week, it intends to do that.<\/em><\/strong>  Still, the Fed can provide only liquidity; it\ncannot get income into workers hands or convince people to spend.  That would require a combination of fiscal\npolicy and improving consumer confidence. \nFrom the Michigan survey discussion, it is clear that the threat of a\nresurgence in the virus continues to hang heavy on household thinking. <\/em><\/strong> With so many states seeing an uptick in cases,\nthe impact on confidence could offset, at least to some extent, the improvement\ncreated by the reopening of the economy. \nAlso, as we go through the summer, the income supplements are slated to\ndisappear.  That raises questions about\nthe ability of many households to keep spending even at their reduced pace.<\/em><\/strong>  Thus, there remain many uncertainties facing\nthe economy.<\/em><\/strong>  <\/p>\n\n\n\n

The markets have bought into the V-shaped recovery\nwith no impact from a virus resurgence. But the extent of the right side of the\nV is in doubt.<\/em><\/strong>  Yesterday\u2019s meltdown is an\nexample of what could happen once the surge in job gains fades after the\neconomy largely reopens and if the current uptick in cases accelerates and\nbecomes more widespread.<\/em><\/strong>  The\nexuberance has taken us almost all the way back and it can have long legs.  Alan Greenspan gave his famous irrational\nexuberance talk in early December 1996.  The\nmarket (NASDAQ) kept going up for another 3.5 years. When the music will stop, if it\never will, is anyone\u2019s guess, especially given all the liquidity the Fed is\npumping into the system.  But as we saw\non a number of occasions over the past twenty years, if it does, the impacts\ncan be massive.    <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Sentiment: +9.1%; Current Conditions: +6.7%: Expectations: +10.9%\/ Import Prices: +1%; Fuel: +20.5%; Food: +2.2%; Exports: +0.5%; Farm:-0.5% IN A NUTSHELL:  \u201cHouseholds are feeling a little better about the economy, but they are hardly exuberant.\u201d WHAT IT MEANS:  To get the economy really going, we need households to start spending a lot more.  How … Continue reading Mid-June Consumer Sentiment and May Import and Export Prices<\/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":[3],"tags":[],"class_list":["post-1760","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1760","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=1760"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1760\/revisions"}],"predecessor-version":[{"id":1761,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1760\/revisions\/1761"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1760"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}