Yesterday, we were told Fearful Investors Lost Faith in Trump.
Today, Bloomberg tells us Surge in Expectations Drives Gain in U.S. Consumer Sentiment.
Consumer sentiment climbed in August to a seven-month high as a measure of the outlook for the U.S. economy and personal finances registered the largest one-month advance since the end of 2011, according to University of Michigan survey data released Friday.
Consumer sentiment has recovered following a two-month slide as President Donald Trump’s legislative agenda ran into several roadblocks.
Highlights
- Sentiment index rose to 97.6 (est. 94) from 93.4 in July
- Expectations measure jumped to 89 from 80.5 the prior month
- 8.5 point increase in consumer expectations biggest since December 2011
- Current conditions gauge, which measures Americans’ perceptions of their finances, fell to 111 from 113.4
Key Statement
“The precautionary mood of consumers had required price discounts and low interest rates to offset their economic uncertainties, now consumers are more likely to base their spending decisions on a renewed confidence in their jobs and incomes,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.
OK Let’s Ask Consumers
Instead of asking consumers how they feel, why not ask them what they expect to do? Oh, wait, the Fed just did that.
Consumer Spending Expectations Down Again
On August 14, I wrote Consumer Spending Expectations Down Again: Dear Fed, Why Don’t You Believe Your Own Survey?
Household Spending Projections
Household Income Projections
Projection Comments
- Income projections are volatile but at least they are trending higher across the board.
- Spending projections are less volatile and trending lower at every level.
- At the 25th percentile level, a group that no doubt spends every cent they make, spending expectations are zero. Those projections were in negative territory in April.
Fed Chair Janet Yellen does not believe the Fed’s own reports. Instead, she relies on consumer confidence numbers that tend to track the stock market or gasoline prices more than anything else.
Perhaps New York Fed President William Dudley does believe in the report.
Earlier I commented NY Fed President Wants Consumers to Tap Home Equity: Didn’t We Try That Before?
Consumer Sentiment Nonsense
- Economists do not believe what consumers say they will spend. Instead, they ask consumers how they feel.
- Economists believe how consumers feel in the future will impact what they spend in the future.
- Of course, how consumers expect to feel six months, likely has little bearing on how they will really feel six months from now.
Inflation Expectation Nonsense
Economists also believe in inflation expectations. The theory is that consumers will rush out and buy things now if they expect prices will rise.
In reality, the most that can happen is a small bit of demand shifting. If you need a washing machine, you buy one. You don’t buy two of them because you think prices will go up. Nor will you buy one if you do not need one.
You may not even know you need a washing machine until it breaks. When it does break, you will get one. You won’t wait a month if you think prices are likely to drop.
Consider food and gas. Whether or not you think food or will go up in price, you can only buy as much food as you have storage space, and you can only buy as much gas as will fit in your car tank.
If you need a coat, you will buy one, if you can afford one. If you know there is a coat sale coming up next week, you wait a week.
If coats get cheap enough on sale, you may buy a second one in a different style. Bargain buying behavior is the opposite of what the economists expect.
Finally, consider electronics. Prices constantly drop and quality constantly rises. Under Fed theory, no one would buy electronics knowing full well they could get the item in the future at a cheaper price.
Nonsensical statements from the Fed came out again in the July FOMC minutes. Here is the statement: “Participants agreed that a fall in longer-term inflation expectations would be undesirable, but they differed in their assessments of whether inflation expectations were well anchored.”
For more details regarding silly Fed comments, please see Absurd Inflation Discussion by Fed Jackasses
The amount of widely-believed economic hooey is staggering.
Mike “Mish” Shedlock
https://youtu.be/N_wr-Vtqx90
Off Topic: Mish this fits in with the discussion that Medex Man and I had on your blog the other day with regard to George Soros.
I haven’t watched your youtube link. I don’t know anything about it pro or con.
I don’t think it is appropriate for someone posting anonymously to be attributing your video or your comments to others.
Your comments / videos are your own. Put your own name or ID on them
“The precautionary mood of consumers had required price discounts and low interest rates to offset their economic uncertainties, now consumers are more likely to base their spending decisions on a renewed confidence in their jobs and incomes,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.
….
Really?
Has price discounting ended?
Sorry, Mr Curtin … I’ll take Dick’s CEO and GM’s word over yours … any day … and every day.
As a retailer, we are seeing more and more discounting out of our distributors. They are literally begging for sales. I just bought some product from a local retailer that sold it to me for half of wholesale. What does that tell you?
Folks ain’t buying from “that” retailer.
Fell off the back of a lorry.
The discounting not going away anytime soon.
The inventory supply line STUFFED. As someone pointed out the other day here West Coast imports up …. but, So? Anything arriving now from Asia probably ordered 6 months ago … when The Great Trump Reflation very much in play.
WASHINGTON – Boosted by continuing sales growth, August is expected to be the busiest month on record for imports at the nation’s major retail container ports and 2017 is on track to set a new annual high, according to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates.
https://nrf.com/media/press-releases/imports-set-hit-new-monthly-and-annual-records-retail-sales-continue-increase
Business can stock – and hold – all the inventory they want. But at SOME point there needs to be end user demand. The tapped out consumer only coming out of the foxhole for bargains.
The CASS Freight index has fallen in June. Deliveries no longer above every prior year (except 2014) on the graph.
Who to believe, even the greatest optimist knows that the figures are skewed or as we say in layman’s terms, utter bullshit. 0.1% or 0.2% deviations up or down are still basically zero and you don’t have to have a masters in statistics to understand that.
Economics is a social science based on human behavior. Results can be interpreted in a manner that fits/supports your narrative.
No cash value in (expectation,sentiment, faith)
Exactly. 60% of statistics being false or misleading, invest according to what you see on the streets, not according to what some academic, who has never stood in a checkout line, goal seeks to meet his theory.
“Consumer sentiment has recovered following a two-month slide”
Are these reports like bouncing balls, now? I can’t keep straight which direction they are going.
Yawn, more meaningless gibberish from the High Priests…
That’s why I come to this site-nice to get a dose of reality instead of the panic/exultation cycle I see elsehwere.
Here’s one,,,, “4.3 % unemployment,,,, and the sky is falling. “
Gallup does a far more extensive monthly survey (14,179 sample size) but you won’t hear about in the media because it’s been sounding some caution recently. i won’t link it, so you have to go to their site to see it (navigate to economics surveys). It’s called the “Gallup U.S. Economic Confidence Index” and the last survey was reported on Aug. 1.
Gallup asks a stark question: Is the economy getting better or worse? 49% say it’s getting worse, 45% say it’s getting better. The news is not all negative though as 33% say the economy is good/excellent while 22% say it’s poor.
However, Gallup publishes a chart showing survey results since 2008 and it confirms my own gut about what’s going on. The economy “peaked” in late 2015, just before the sharp stock market drop around that time. Confidence continued to decline until Trump was elected and then we entered what I call the “Trump dead cat bounce”, which resulted in a huge surge in consumer confidence (as well as the stock market!).
Well, Gallup’s survey confirms that the Trump bounce is over and we are headed down again. It was a false sense of confidence and all the other data released over the last few months confirms it.
The problem with a question like that is that the answer is highly regional in nature. Here in Colorado the economy is “booming” with gas and Californian transplant real estate. But in Pennsylvania you’re seeing empty main streets and the only work is in taking care of retirees. This summer I went back east and didn’t see much activity anywhere except places like Ollie’s. So if the survey happens to get a lot of people picking up in one area code over another it can dramatically skew the results. Yea, I know they say the compensate for that but how well does that really work in practice? And unless they are randomly dialing and mixing cell phones into the mix (which I believe is still illegal) they are likely missing thousands of Millennials and other people who don’t have land lines, again skewing toward retirees and people in areas that aren’t growing.
I have been shopping for work clothes and gym/yoga clothes. I have been to TJ Maxx and Marshall’s several times this summer. Each time there were long lines at the registers. I probably spent $450 this summer at both stores. I bought things like 2 Manduka yoga mats (usually $105 each) for $40 each for my daughters. Both of these stores have highly discounted prices on the items I wanted to buy.
I also went to the local mall twice and bought nothing. I saw many empty store fronts in my mall, and I am near a major city.
I am a teacher, and we are getting a step (pay) increase this year. 28% of my increase is immediately wiped out because our health insurance premiums and drug co-pays are going up. 7% of my pay goes towards my pension. After taxes, pension, and the health insurance premium increase my $2000 pay increase will really be $11.54 a week after taxes. My home and auto insurance and property taxes are also increasing this year, so my pay increase is probably a net zero in disposable income.
I am grateful to have my job, and I appreciate that my county is funding a step increase this year. I am fortunate to have good health insurance and a future pension through my employer. I am treated respectfully by my school administrators and get a lot of satisfaction from knowing that I am making a difference in the lives of my students. I would be one of the people in the survey with a “positive outlook”. But I won’t be spending more money next year than I did this year because there isn’t more to spend. I think a lot of people are in my situation. I will continue to only buy when I can find highly discounted prices on the items I need and can afford based on my income.
Are you aware of the burden the teachers union imposes on taxpayers?
Teachers themselves are paid very little, but your union makes sure that school administrators are paid obscene amounts. Administrators, especially the ones that “work” (not really) at central offices, work far fewer hours than teachers. They don’t have to content with students that don’t get enough to eat, or students who’s home life may or may not even be safe. Administrators don’t have parent teacher conferences and have to deal with parents who, ahem, just got off a very long day at work and are looking to take their frustrations out on whomever they see next.
But administrators make multiples of what teachers make, and the teachers union makes sure that continues year after year. Taxpayers can’t fund schools properly when so much money is being diverted to unnecessary overhead.
Last year, my local school district paid $600K for a new superintendent while teachers were basically bullied into taking a pay freeze. The superintendent imposed a “new math” curriculum, which baffled teachers, students and parents with graduate engineering and math degrees. The superintendent was let go after one year (with a golden parachute), teachers are still under a pay freeze and classroom supplies are very low going into the new school year. FYI, the teachers union signed off on all of this, and for reasons that baffle parents, many teachers (who got pay freezes) are defending the union for screwing them. I have yet to hear any teacher explain why teachers accept and defend their own union screwing teachers to benefit administration?
Please also remember that most taxpayers don’t get a pension at all. Most do not get a pay increase that covers health insurance increases — the irate parents yelling at you about their kid did not break even versus last year, their take home pay declined thanks to skyrocketing obamacare costs and rising property taxes that go toward (evidently) administrator pay.