Strong US Consumer Confidence Cheers Retailers
- Black Weekend indicated US Consumers shopped for the real deals.
Having just gotten through a huge Black Friday, Small Business Saturday and Cyber Monday, news that consumers did not go out and shop ‘till they dropped in October was not something for retailers to worry about.
After splurging on vehicles in September, sales slowed a bit.
In contrast, consumption of services was up strongly and demand for non-durable goods rose at a decent pace.
Without any additional increase, real, or inflation-adjusted consumption is already rising at a 1.7% pace so far this Quarter. It looks like households will add to growth at a moderate rate this Quarter.
There remain questions about the ability of households to lead the way. Disposable income was up solidly in October, but it did not come from wage gains. Most of that increase was largely due to hiring, as hourly wage increases continue to be minimal. Still, after-tax income did increase faster than spending so the savings rate edged upward, at 3.2%.
Jobless claims declined a touch last week and the level is quite low.
What it means
Solid consumer confidence, massive job openings and little fear of layoffs is likely to translate into a very merry holiday season for retailers of all types.
The early data point to a very big weekend of sales and that is good news for the economy.
But with Cyber Monday lasting about 6 weeks and Black Friday starting in September, it is hard to know what the last few weeks of the shopping season will bring.
The consumer has to step up. Some of the good growth we have seen was driven by hurricane replacement and that is just not sustainable.
With the savings rate at a level not seen except just before the start of the last 2 recessions, and with wage gains disappointing, there is only so much the consumer can do to drive growth forward.
And if the Accounting Principals survey is any indicator, workers should not expect end of year bonuses, which firms seem to be doing away with.
About the only thing saving consumers is that inflation is still low and it is not accelerating.
As for the businesses taking up the slack, that too is open to debate.
The Trump Administration’s tax bill making its way through Congress will do much to incentivize productivity enhancing investment, I do expect capital spending to rise, no matter what the naysayers broadcast.
Consumers enjoy all the bargains they got this past week, but growth requires them to spend more, so to do that the consumers have to get more.
The Trump Policies are set to do that yet this year.
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