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Photo AP / Patrick Semansky
ASSOCIATED PRESS
It's a terrible news. Consumer sentiment results from the University of Michigan surveys consumers crashed. And the worst is why.
First, in figures
Analysts expected the month of August to be stable, but preliminary mid-month results upset expectations. Analysts, trusting these early readings, have dropped their forecasts accordingly. However, the final results announced on Friday, August 30 are even lower than these revisions.
Consumer readings over the last three years
John Tobey (Federal Reserve Bank of St. Louis – FRED)
Now, the killer – what consumers have said
Of U-M consumer survey report"Tariffs weaken trust." (Underline is mine)
& nbsp; "ANN ARBOR"The index of the spirit of consumption recorded its largest monthly decrease in August 2019 (-8.6 points) since December 2012 (-9.8 points), according to University of Michigan Consumer surveys.
"The recent decrease is due to negative references to tariffs, which were mentioned spontaneously by one in three consumers, he said. Trump's pricing policies have been repeatedly reversed in response to the threat of higher future rates.
"Such tactics can have some merit in the negotiations with China but act to increase uncertainty and reduce consumer spending at homeCurtin said. Unlike repeated price reversals, negative consumer confidence trends can not be easily reversed. "
This last reality deserves to be repeated: "Unlike repeated price reversals, negative consumer confidence trends can not be easily reversed."
And…
"Negative impact on tariff expenditures
"The overall attitude towards home appliances, home electronics and other household goods dropped to its lowest level in five years as net benchmark prices were more negative than ever since June 2008. "
And…
"Despite falling interest rates, the attitude of buying vehicles and homes has decreased in the August survey. "
Note, in particular, this sentence: "Despite lower interest rates …", this is why the Fed can not recharge the economy or the stock market. (See my article, "The Federal Reserve will not produce a bull market. ")
But what about the positive report from the US Bureau of Economic Analysis (BEA), also released today (Friday, August 30)?
Use this report to understand the dramatic change we are witnessing. The BEA data are for July (see AP article, "Optimistic US consumers increase spending by 0.6% in July"). The U-M Consumer Sentiment data is for August.
Why change so quickly? The tariff changeover point for one. Add to that the decline in personal income growth in July. Of AP article: "… personal incomes only increased by 0.1%, the smallest gain in 10 months. " [Actually, +0.1% is the nominal number. The appropriate number to use is the “real” one, removing July’s inflation. That number is negative: -0.1%). Below is the graph for this year’s monthly growth rates. Clearly, July is a concern.]
2019 Personal Income and Real Personal Income – Monthly Growth Rate
John Tobey (Federal Reserve Bank of St. Louis – FRED)
In addition, July followed higher spending in the second quarter, which means it was possible to withdraw in August …
Of AP article: "Trade disputes discouraging business investment and limiting exportsconsumers are becoming more important to the US economy. Household spending was the main driver of growth in the quarter from April to June, while spending rose the most strongly in five years. "
It is important to note that the contraction of incomes in July is not an aberration, but a natural consequence of the persistent slowdown of several months in the growth of manufacturing and hours worked (see my article, "Deterioration of the leading indicator: manufacturers in decline").
Time is up…
President Trump's tariff tweet tactic on Trump's 19 months seems to have finally hit the mark to satiety point. The rapid succession of tweets oscillating between severe criticism and promising agreement, punitive tariffs and favorable reversals has exhausted optimism and perhaps even confidence. As a result, this jagged rhetoric is now confusing, uncertain and even worrying among consumers.
If consumer spending declines, this economy will obviously suffer because it is associated with the weakening growth of industry and manufacturing. In addition, the Federal Reserve chair Jerome Powell is now directly linked to the slowdown in economic growth Asset tariff damages. This environment is conducive to spending cuts and fears of recession.
Remember, warnings have been sounded …
We should not be surprised at the result we are currently seeing. Nineteen months ago, when President Trump invoked emergency powers (bypassing Congress) to announce his first tariffs, experts (economists, Wall Streeters, business leaders, historians and even politicians) have warned of damage and inevitable losing and losing deals. war that would emerge.
It took a while, but the repercussions are now on us.
The bottom line
The final results of today's Consumer Opinion Survey (Friday, August 30) confirm the worst: consumers, the mainstay of this economic period, are worried and ready to pull out. The unresolved adverse effects of the wars of tariffs and trade wars, visible in the manufacturing data, have now hit home with consumers. As a result, the economy is in danger, which means that the stock market, convertible bonds and less-rated bonds are dangerous places to invest.
The best strategy seems to be the cash reserves.
Disclosure: The author holds only cash reserves
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Photo AP / Patrick Semansky
ASSOCIATED PRESS
It's a terrible news. Consumer sentiment results from the University of Michigan surveys consumers crashed. And the worst is why.
First, in figures
Analysts expected the month of August to be stable, but preliminary mid-month results upset expectations. Analysts, trusting these early readings, have dropped their forecasts accordingly. However, the final results announced on Friday, August 30 are even lower than these revisions.
Consumer readings over the last three years
John Tobey (Federal Reserve Bank of St. Louis – FRED)
Now, the killer – what consumers have said
According to the U-M consumer survey, "tariffs weaken trust." (Emphasis mine)
"ANN ARBOR"The index of the spirit of consumption recorded its largest monthly decrease in August 2019 (-8.6 points) since December 2012 (-9.8 points), according to University of Michigan Consumer surveys.
"The recent decrease is due to negative references to tariffs, which were mentioned spontaneously by one in three consumers, he said. Trump's pricing policies have been repeatedly reversed in response to the threat of higher future rates.
"Such tactics can have some merit in the negotiations with China but act to increase uncertainty and reduce consumer spending at homeCurtin said. Unlike repeated price reversals, negative consumer confidence trends can not be easily reversed. "
This last reality deserves to be repeated: "Unlike repeated price reversals, negative consumer confidence trends can not be easily reversed."
And…
"Negative impact on tariff expenditures
"The overall attitude towards home appliances, home electronics and other household goods dropped to its lowest level in five years as net benchmark prices were more negative than ever since June 2008. "
And…
"Despite falling interest rates, the attitude of buying vehicles and homes has decreased in the August survey. "
Note, in particular, this sentence: "Despite lower interest rates …", this is why the Fed can not recharge the economy or the stock market. (See my article "The Federal Reserve will not produce a bull market.")
But what about the positive report from the US Bureau of Economic Analysis (BEA), also released today (Friday, August 30)?
Use this report to understand the dramatic change we are witnessing. The BEA data are for July (see AP article, "Optimistic US consumers boost spending by 0.6% in July"). The U-M Consumer Sentiment data is for August.
Why change so quickly? The tariff changeover point for one. Add to that the decline in personal income growth in July. Of AP article: "… personal incomes only increased by 0.1%, the smallest gain in 10 months. " [Actually, +0.1% is the nominal number. The appropriate number to use is the “real” one, removing July’s inflation. That number is negative: -0.1%). Below is the graph for this year’s monthly growth rates. Clearly, July is a concern.]
2019 Personal Income and Real Personal Income – Monthly Growth Rate
John Tobey (Federal Reserve Bank of St. Louis – FRED)
In addition, July followed higher spending in the second quarter, which means it was possible to withdraw in August …
Of AP article: "Trade disputes discouraging business investment and limiting exportsconsumers are becoming more important to the US economy. Household spending was the main driver of growth in the quarter from April to June, while spending rose the most strongly in five years. "
It is important to note that the contraction of incomes in July is not an aberration, but a natural consequence of the continued slowdown in manufacturing and hours worked growth of several months (see my article, "Deterioration by Leading Indicator: manufacturers in decline ").
Time is up…
President Trump's tariff tweet tactic on Trump's 19 months seems to have finally hit the mark to satiety point. The rapid succession of tweets oscillating between severe criticism and promising agreement, punitive tariffs and favorable reversals has exhausted optimism and perhaps even confidence. As a result, this jagged rhetoric is now confusing, uncertain and even worrying among consumers.
If consumer spending declines, this economy will obviously suffer because it is associated with the weakening growth of industry and manufacturing. In addition, the Federal Reserve chair Jerome Powell is now directly linked to the slowdown in economic growth Asset tariff damages. This environment is conducive to spending cuts and fears of recession.
Remember, warnings have been sounded …
We should not be surprised at the result we are currently seeing. Nineteen months ago, when President Trump invoked emergency powers (bypassing Congress) to announce his first tariffs, experts (economists, Wall Streeters, business leaders, historians and even politicians) have warned of damage and inevitable losing and losing deals. war that would emerge.
It took a while, but the repercussions are now on us.
The bottom line
The final results of today's Consumer Opinion Survey (Friday, August 30) confirm the worst: consumers, the mainstay of this economic period, are worried and ready to pull out. The unresolved adverse effects of the wars of tariffs and trade wars, visible in the manufacturing data, have now hit home with consumers. As a result, the economy is in danger, which means that the stock market, convertible bonds and less-rated bonds are dangerous places to invest.
The best strategy seems to be the cash reserves.
Disclosure: The author holds only cash reserves