Shop-eat-surf’s Post

The latest data indicates a cooling U.S. economy in the first quarter, with retail sales rebounding less than expected in February. Rising inflation and high borrowing costs are contributing to a slowdown in consumer spending. Despite signs of economic deceleration, the Federal Reserve is unlikely to cut interest rates before June. Economic indicators, such as a larger-than-expected increase in producer prices, suggest persistent inflationary pressures. #USEconomy #Inflation #FederalReserve #EconomicOutlook

Continuing signs of a strong economy. Along with the slightly higher than anticipated inflation numbers for September that came out last week continue to point to ongoing higher interest rates.

Consumer spending growth is slowing as the economy settles down amid higher interest rates intended to reduce inflation, National Retail Federation chief economist Jack Kleinhenz noted in the August NRF Monthly Economic Review. #August #ConsumerSpending #COVID19 #FederalReserve #Inflation #Kleinhenz #NationalRetailFederation #NRF #Pandemic #PersonalConsumptionExpenditures #Recession

While all minds were laser focused on an economic risk called stagflation, back in late 2022, now seems to be the time to pay more attention to it. In a simple term, stagflation happens when the economy experiences low growth, higher unemployment and inflation simultaneously. If we consider the long and variable lag in monetary policy and higher interest rates that still to be seen from Fed's tightening of the last two years and start seeing signs of a slow down in the economy while we see a more stubborn inflation at these levels, just like we saw on Tuesday's CPI report, the imminent risk of stagflation seems to be much closer than is being paid attention to. Additionally, in today's jobless claims report, while the initial jobless claims fell, but the continuing and the 4 week average claims were up, a persistent trend for the past 4 weeks to keep eyes on.

#Economy | U.S. retail sales rebounded less than expected in February, suggesting a #slowdown in consumer spending in the first quarter amid rising #inflation and high borrowing costs. The signs of slowing economic activity are, however, unlikely to spur the #FederalReserve to start cutting interest rates before June.

The chart below highlights just how little growth there has been in certain card spending categories since the start of 2022. Keeping in mind these are nominal values (i.e. impacted by inflation) and we've experienced very high population growth recently, it reinforces just how weak consumer demand is currently. With many headwinds still swirling we expect the retail environment to remain tough over 2024. There may be some relief from tax changes, but when consumer uncertainty is high and the unemployment rate is rising, we question how much might be spent vs. saved.

A week of relatively disappointing economic news...Retail sales so far in 2024 have failed to impress while inflation has crept back upwards. This latter point is the crucial metric. What to expect? Wages are increasing at a relatively brisk clip, budget deficits are expanding, and the overall economy remains vulnerable to an energy price crunch. None of which is good news for interest rates, which is - at the moment - the most important factor affecting the equity markets.

“Interest rates are high; inflation remains elevated and pandemic savings are dwindling. Yet the American consumer is on a spending binge.” The American consumer has held up surprising well during an uncertain macro environment including geopolitical strife and the FED’s policy of Quantitative Tightening.   Some interesting numbers below: 1. Retail spending rose a stronger-than expected 0.7% in September. 2. Unemployment remains at a historical low of 3.8%. 3. Personal savings rate has dropped to 3.9% down from a peak of 32% during the pandemic.   My question remains: How long will consumer spending remain elevated under the FED’s “Higher for Longer” policy? Source: The Wall Street Journal

The Federal Reserve's latest Beige Book shows the labor market has seen widespread softening this autumn. Retail sales of discretionary items and durable goods, like furniture and appliances, declined, on average, as consumers showed more price sensitivity. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee. The FOMC is expected to leave its benchmark interest rate unchanged for a third straight meeting when the Fed meets again in December.

Our Wealth Management Practice published this piece today on spending and inflation data. In this time of economic transition, an important conclusion is: "The mixed news in the April retail and inflation data exemplifies the mixed data that has defined the economy in recent months. It’s largely good news for the Fed, who long warned of “pain” that would be needed to bring inflation back under control. Whether that pain culminates in a recession remains to be seen, but a marked slowdown in growth is well underway." Read the full piece below.