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Consumer Confidence Sucks
January 31st, 2012 | 
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Confidence among U.S. consumers unexpectedly dropped in January as gasoline prices picked up and more Americans said jobs were hard to get.
The Conference Board’s confidence index fell to 61.1 from a revised 64.8 reading in the prior month, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a rise to 68. The figure was lower than the most pessimistic projection.
Why is this a surprise? As I noted early in the month the Employment Report, which many said showed “improvement” with a +200k headline number, in fact showed job loss when one looked at the household survey, and it is actual consumers who buy actual things, not government fudge-boxes!
Of course we can’t have the truth in the mainstream media off those reports, can we? Never mind that other data has showed a contracting consumer spending appetite and more desperation as credit is being used once again in a “last gasp” attempt to avoid insolvency.
The data is all around you if you care to look — the consumer is collapsing as there has been no recovery of materiality in employment. Just look at the labor participation rate!
Recovery….. where?
Wake up America. The government’s policy of ladling out “free cheese” in an attempt to prevent the adjustment of the economy back to what we can actually afford both at a government and personal level is both futile and stupid. It in fact serves only one purpose — attempting to buy votes.
Economic Data Roundup: More Suck. Everywhere.
In the week ending September 10, the advance figure for seasonally adjusted initial claims was 428,000, an increase of 11,000 from the previous week’s revised figure of 417,000. The 4-week moving average was 419,500, an increase of 4,000 from the previous week’s revised average of 415,500.
Oh look, it’s going up again! What do we blame this time? I’m sure we can find something….. (How about “Your policies suck Mr. President and Congress?”)
There’s nothing worthwhile in the extended claims data – the total dropped by 25,000 in the August 27th week, but the increases the last couple of weeks are not yet in these numbers. They will be, but not until we get right up against the employment report for September.
Note that with the claims numbers we’re seeing and the trend direction the risk of a negative September NFP report is climbing fast. If you’re wondering what’s feeding the panic level in Obama’s White House with his “jobs” bill look no further than this series.
What’s the “misery index” again? I seem to remember it being 12-month chained inflation and unemployment. Well?
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment.
But but but…. there’s no inflation, right?
The index for all items less food and energy increased 0.2 percent in August, the same increase as the previous month. Shelter and apparel were the biggest contributors, though the indexes for most of its major components posted increases, including used cars and trucks, medical care, household furnishings and operations, recreation, tobacco, and personal care. The new vehicles index, unchanged for the second month in a row, was an exception.
The “but it’s all energy prices and they’re volatile” excuse is long in the tooth and running out of gas. That dog won’t hunt any more folks….
The energy index has risen 18.4 percent over the last year, while the food index has increased 4.6 percent.
Of course Senior Citizens who were prudent and saved don’t have a problem with this, right? After all they don’t need to buy food or energy… and neither does anyone else…. right?
This doesn’t disproportionately hit the lower class and working poor, does it? I mean, food and energy aren’t a disproportionate amount of their spending, are they?
Hmmmm….
There are some big numbers in the tables – of note are virtually everything food-related, up 4% or better across the board with some things such as meats and dairy up 8 and 9% respectively. Fuel oil was up a stunning 27%, water and sewer services up nearly 5%, apparel up 4% and private transportation costs up an eye-popping 12% – with public transport costs skyrocketing as well (7.2%).
Hospitals jacked people for 6.2% more while higher education screwed you to the tune of 4.4%.
These are annualized changes (from August 2010) and put into stark relief exactly what sort of squeeze has been felt by the common person. Everyone loves to talk about “oh it’s 0.2% this month” but few will go back and look at who this hits and how hard – and how it all looks on a annualized basis.
When you look at the monthly change in these categories you find no joy either. Monthly change on food was 0.6; annualized that’s 7.4%. Apparel was up 2.3% last month, which you better hope doesn’t continue (as it’s an annualized rate of change of 31%!) Both private and public transport, thank God, did level off this last month.
In short while the inflation trend may be slowing down for the lower class and working poor the damage has already been done.
Make sure you thank Ben and Obama.
Empire Manufacturing: More Suck Part Deux
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers worsened for a fourth consecutive month in September. The general business conditions index inched down one point, to -8.8. The new orders index held steady at -8.0, while the shipments index dropped sixteen points to -12.9. The inventories index, negative for a third month in a row, fell to -12.0—a sign that inventories continued to decline. After dropping significantly over the summer, the indexes for both prices paid and prices received climbed several points, suggesting that the pace of price increases picked up. Employment indexes were below zero, indicating that employment levels and hours worked fell over the month.
In other words it all sucks, basically - while prices are picking up again into collapsing demand.
What’s worse is that the forward expectations for employment are now zero (no growth) and for the workweek are negative for the second month in a row. This is a seriously bad indication of forward economic activity, and comes into major softening in the other regional indices.
We’re rapidly piling up the “recession” indicators, exactly as I expected would happen a year ago when the PPI changes started to come into the focus.
Brace for the impact folks – this ride is going to get very rough in the terms that matter the most to you – jobs.
Philly Fed: Sucks, But Better Than Traders Expected
When you get a crap number and the market goes up you know the expectation was “Armageddon.”
Responses to the Business Outlook Survey this month suggest that regional manufacturing activity is continuing to contract, but declines are less widespread than in August. The survey’s broad indicators for activity, shipments, and new orders all remained negative for the second consecutive month. Responding firms, however, indicated that employment was slightly higher this month. The broadest indicator of future activity remained positive and rebounded this month, suggesting that recent declines are not expected to continue over the next six months.
Eh, I’m not impressed.
One good numbers in there – the employees number stopped falling apart. But – the workweek did not, which makes one wonder whether seasonal factors are involved in this more than anything else. I cannot get excited about alleged “stabilization” in employment in that survey with hours worked declining as that directly contradicts the alleged improvement in the employee numbers.
Posted in Confidence, Consumer, Consumer Price Index, Costs, CPI, Economic Crisis, Economy, Empire Manufacturing Index, Financial System, Job Losses, Jobs, jobs report, Philly Fed, Price Inflation, prices, Unemployment | 
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So You Can't Win Against "Big Corporations" Eh?
JERUSALEM—Israel’s powerful dairy companies have surrendered to a three-week boycott and pledged to lower prices on cottage cheese, as Israeli consumers joined the wave of popular protest sweeping the region—in their case, to take on rising prices.
The people won and the big corporations lost.
Why? Because instead of whining, complaining and bitching the people instead withdrew their consent, organized and boycotted.
“Facebook not only brought down the president of Egypt, it has now brought down one of the big monopolies in Israel,” said Efraim Sadka, an economics professor at Tel Aviv University. “This is really the first time that the consumers were really able to bring down the monopoly or a market power.”
The first time of many, one can hope. As for the impact? It was quite real:
A person close to Tnuva Food Industries, the Israeli dairy company that controls 70% of the cottage-cheese market, said sales dropped between 10% and 13% during the boycott’s first week. Other people familiar with the issue put the drop at between 20% and 25%.
Now that is an impact.
For those of you out there who believe that the consumer has no power, that the people just must bend over and take it whenever the government – or big business – say “assume the position!” here’s your example folks.
You have the economic power. You. Not they, you.
All it takes is your willingness to use it.
Consumer Prices: Ugly
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.
Increases in indexes for energy commodities and for food accounted for over two thirds of the all items increase. The indexes for gasoline and fuel oil both increased in January, continuing their recent strong upward trend. The index for food at home posted its largest increase in over two years with all six major grocery store food group indexes rising.
Naw, nobody needs to buy those things, right? Ha!
The energy index has increased 7.3 percent over the last 12 months, with the gasoline index up 13.4 percent.
Gee, that’s not a big deal, right?
Now let’s look inside the PDF version and see what sort of surprise is in the table?
Let’s see…. we commonly hear that monetary policy has a lag. Like, oh, six months or so.
Well, we’re about there, right? So let’s see, if we take those last two prints and annualize them (1.004 ^ 12) we get a 4.91% annual “inflation” rate. Is this “stable” prices Ben?
You folks know my view on this. Inflation is manifested in prices but it’s not prices. That is, CPI is a horsecrap measurement, because inflation and deflation is defined by the change in money and credit compared against GDP. The Austrians will tell you it’s just money supply. I argue that this is a bad definition because money and credit spend the same, and fungible things must be counted equally.
In any event there are some real stunners in the unadjusted numbers, which I’ll highlight for you:
These are big annualized changes, and they’re in places where the lower-income people in this nation cannot afford them.
Food, particularly healthy food, cooking oils and similar essentials for preparation, heating fuel, water, sewer and trash collection, gasoline, used cars and public transport are all places that hit the lower income American (those at the 50th percentile and below) radically hard.
The brainstems in Washington DC, including Bernanke, will never get their arms around these numbers and recognize that they are absolutely destroying the majority of the population – which, incidentally, have to be able to function and keep their cool in order for all the fatcats to be able to keep their jobs and keep the economy “moving.”
When you look at the actual percentage of income that these people spend in this area – virtually all, when you get down to it – this is the sort of squeeze that, if it continues, has the potential to produce severe political and civil problems.
No, we’re not Egypt.
Yet.
Posted in Consumer, Consumer Prices, CPI, Economic Crisis, Economy, Financial System, Government, Inflation, Money |
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Dear Santa Letters Ask For Clothes, Shoes, Not Toys
Looking for the reason behind soaring apparel sales and weak sales at Best Buy? You can find an explanation in Sad Santa Letters that the United States Post Office opens a reads as part of “Operation Santa”.
With just nine days to go until Santa shimmies down those chimneys, letters to the big, jolly guy are coming in fast and furious. “The common theme this year seems to be a single mom with young kids, the parent has left — they don’t know who the father is, or the father left — and they can’t pay the bills,” said Pete Fontana, head of the United States Postal Service Operation Santa in New York.
“We had one little girl write in and say all she wants is a winter coat for her mom. Nothing for herself,” he said. “We had another letter for grandparents and they wanted to put a turkey with the trimmings for the holiday dinner … but they couldn’t even get their medicine.”
Other letters are similarly heartbreaking.
Eight-year-old Skayla told Santa that her mother doesn’t have a job and her father lives in the Dominican Republic, leaving it up to her grandmother to buy everything. She asked for clothes and shoes for herself, her 7-year-old sister and their infant brother, even including their sizes.
“Thanks Santa,” she wrote,” I LOVE YOU.”
How You Can Help
If you want to help make a Christmas wish come true, the best way is to Contact a local post office participating in Operation Santa.
Industrywide Demand for Electronics is SoftPlease consider Best Buy cuts outlook as results disappoint.
Dec. 14, 2010, 12:55 p.m. EST
The No. 1 U.S. electronics retailer’s profit fell as lower demand for televisions, notebook computers and videogames led to a sales shortfall in the U.S. While margin widened slightly, analysts said they were concerned that it came at the expense of sales.
Best Buy Co. shares tumbled more than 15% Tuesday, their biggest decline in more than eight years, after the retailer reported an unexpected decline in fiscal third-quarter profit and cut its outlook.
“There’s interest there from consumers on the latest and greatest, but really they are making trade-offs in their discretionary spending, not only across CE [consumer electronics], but within CE categories, where there are periods of time we may have historically seen them buy multiple large products in a year, they are being more choosey at this point in time,” said Muehlbauer [Best Buy's CFO] on a conference call with analysts.
Ample Warning
There was ample warning for that huge miss at Best Buy. On December 3, a report from SpendingPulse showed Retail Sales Led by Apparel, Consumer Electronics and Appliances Down.
Retail sales are way up year-over-year and apparel is leading the way. I have this email from SpendingPulse to share: ….
Year-over-year Total Apparel sales in November saw another sharp monthly increase. At 9.6% this was the largest year-over-year growth in 2010 for that sector following the previous record in October. Total apparel has enjoyed 8 out of 11 months of year-over-year gains so far in 2010. In November, all of the sub-sectors posted year-over-year growth.
For the second consecutive month, the Consumer Electronics and Appliances segment posted a year-over-year decline, although at -1.1%, it was not as severe as October’s decline. The Consumer Electronics sub-category was down by 1% while the Appliance sub-sector fell by 1.6% year-over-year.
Pent Up Demand For Clothes
The SpendingPulse report shows a pent-up demand, not for junk, electronics, or appliances, but for specifically clothes.
Repeating my ending comment from the above article: It’s nice to see shoppers focus on real needs instead of electronic garbage. However, pent-up demand for apparel cannot last forever, nor can apparel sales form the foundation for a lasting recovery.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Behind the Credit Numbers
During the past week there has been a flurry of Federal Reserve reports and commentary concerning the levels of credit in the current economy. The two most notable were:
On July 8th they reported that the level of seasonally adjusted outstanding U.S. Consumer Credit (their G.19 report) decreased during May by $9.1 billion, representing an annualized rate of credit contraction of 4.5%. Although even this change is above the average for the preceding twelve months, it is much smaller than a quiet revision to the previously published April U.S. Consumer Credit figure — which is now reported to have decreased by $14.9 billion (a 7.3% annualized contraction rate).
To put these numbers in perspective, consumer credit has contracted during 15 of the past 16 reported months, and is down a record total $148 billion over that time span. The $14.9 billion in credit ‘lost’ during just April is the second highest monthly amount in history, second only to the $23.4 billion ‘lost’ during November, 2009. And the nearly 6% cumulative reduction in consumer credit over the past 16 months is the largest (on a percentage basis) for any 16 month span since September 1944 — when FDR was still in the White House and people were buying War Bonds instead of tightly rationed consumer goods.
On July 12th Federal Reserve Chairman Ben Bernanke noted that small businesses were not getting the loans that they need to create new jobs. The Federal Reserve’s own data reports that lending to small businesses dropped to below $670 billion in Q1 2010, down about $40 billion from two years prior.
The New York Times reported Mr. Bernanke wondered: ‘How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability? No doubt all three factors have played a role.’
What does this mean?
The reported credit contraction is real, at historic levels and on-going. Although the Federal Reserve does not yet know whether the most recent consumer credit contraction is the result of consumer pay-downs or credit company write-offs, the fact remains that consumer spending and the money supply are both being impacted negatively as consumers (one way or another) clean up their personal balance sheets.
Small businesses, which account for over 60% of gross job creation, are not – for whatever reason – tapping into the credit necessary to create those jobs.
On July 6th we reported that the nearly relentless decline in our ‘Daily Growth Index’ had leveled off, but cautioned that the index should be viewed from a longer perspective. Since then the decline has resumed:
(Click on chart for fuller resolution)
When the most recent period of contraction in our ‘Daily Growth Index’ (January 15, 2010 to date) is charted along with the similar ‘Daily Growth Index’ contraction events from 2006 and 2008 (with the first day of each contraction aligned on the left-hand axis) the relative severity of each contraction can be visualized.
(Click on chart for fuller resolution)
One measure of the true severity of an economic slowdown is the ‘area under the curve’ (or ‘above’ the curve in this case) swept out by the ‘Daily Growth Index’ over time. This area is just the average magnitude of the decline times the duration of the contraction event. During the 2006 slowdown this area was about 136 percentage-days of contraction, while the 2008 event was much more severe at 793 percentage-days. The 2010 event has now reached 288 percentage-days, over twice the severity of 2006 and well over a third of 2008 ‘Great Recession’ — and it is still growing.
The key point to notice in the above chart is that if the current 2010 curve continues its current course, in about 20 days the 2010 slowdown will be more severe on a day-to-day basis than the 2008 ‘Great Recession’ was at the same point in its respective evolution. Unless the economy begins to pick up quickly, a double dip is likely — with the second round milder but lingering longer than the first.
Note: A more complete list of historical Commentary can be found on our History Page
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