Consumer confidence fell sharply in September to a three-month low driven by the risks posed to the manufacturing and farming sectors because of trade tensions with China. Confidence fell in regards to the current situation as well as projections for the future. Consumer expectations for six months in the future actually dropped to their lowest level since the beginning of the year. One of the more worrisome findings from this month was that the confidence in the labor market also fell – consumers don’t believe jobs are as plentiful today as they were even just a month ago.
Moral of the story: There’s only so much the Fed can do to sustain economic growth by cutting rates – consumers have been running the show and as confidence deteriorates, it’s definitely a cause for concern. Geopolitical risks have put companies on edge and it has slowed hiring, it’s evident consumers are noticing.
thank u, next
Politics in focus bigly this week as House Speaker Nancy Pelosi announced a formal impeachment inquiry into President Trump (boy bye). The President obviously believes the stock market is reaching all-time highs entirely because of him and tweeted (obviously) that “if they actually did this the markets would crash.” Remember the list of grievances the market has right now with geopolitical uncertainty right now? Add this to the list, too.
Moral of the story: Aside from the disruption in Washington, this calls into question any progress on the numerous international relations that are currently in question. If I was China or Canada or Mexico right now I’d hold tight until *hopefully maybe* somebody else was making decisions in the Oval Office before giving up anything else on trade.
I do my hair toss, check my…spending
Even as incomes increased steadily in August, consumers put most of that money into savings driven by concerns around their economic future. Spending increased by only 0.1%, the slowest rate in six months, while savings increased at three times the rate. The Fed’s preferred inflation measure, the PCE index, remained fairly unchanged at 1.4%, still well below the 2% target.
Moral of the story: July consumer spending spiked a little, probably driven by Amazon Prime Day, and spending in August could have been negatively impacted by Hurricane Dorian’s impact on the southeast. These factors could cause us to question the efficacy of a decline in consumer spending, but it comes in tandem with the decline in consumer confidence, providing some support for the logical conclusion that consumers are a little shook.