Displaying items by tag: consumers

(Detroit)

The car industry is the epicenter of the current economic slowdown. The car business is both the culprit and a victim of the biggest economic downturn since the Crisis. It is not just in Germany, but also in Asia and Detroit. The industry uses so many raw materials and supplies from many adjacent industries, that the contraction in the auto sector is is dragging the whole global economy down with it. The chief executive of VW says “This trade war is really influencing the mood of the customers, and it has the chance to really disrupt the world economy … Because of the trade war, the car market [in China] is basically in a recession . . . That’s scary for us”.

FINSUM: What is curious about the car downturn is that consumers are very strong. Therefore, from our view, the weakness in the auto sector is more concerning because it could be a leading indicator.

(New York)

Quick quiz: what is the pillar of this bull market? Unless you answered “the US consumer”, you probably are not getting a passing grade. Therefore, any dents to the teflon-coated US consumer are very worrying, and that looks like the road we are headed down. New consumer spending data is in and it is poor. Spending at gas stations, on cars, and on home materials was considerably weaker. The overall boom in spending now appears to be over as we head into the winter, which could prove to be more than just meteorological.

FINSUM: There is good news and bad news. On the downside, this means that consumers may no longer be able to shoulder the load of carrying the economy. On the positive side, this could lead to rate cuts by the Fed, which the market would love, at least in the short-term.

(New York)

Every investor seems to be panicking about the yield curve right now, and not without reason. An inverted yield curve has accurately predicted each of the last several recessions. And not only is the yield curve inverted, but yields are shockingly low—the 30-year Treasury yield just went sub-2% for the first time ever. However, that is not what you should be worried about, argues a top economist at the Economic Outlook Group. Instead, you should be watching consumers like a hawk, as they will be the deciding factor as to whether the US heads into a recession. “All eyes should therefore be laser focused on what households are thinking and doing in the coming months--- and not on some tampered yield curve”, says Bernard Baumohl, chief global economist at the Economic Outlook group.

FINSUM: The yield curve is less manipulated than it once was, but we are far from a rate environment one could say was comparable to inversions past. We think this analysis is spot on.

(New York)

Where is the economy headed? Investors seem to be torn at the moment. On the one hand they seem to feel that the economy must be headed south because of the long running expansion and recent inversion, but on the other, there is little data to really back up that claim. Accordingly, every new piece of economic data is being closely watched right now. The newest in is retail sales, which had fallen a bit recently. Today, though, is a different story, with March retail sales seeing their biggest jump in 18 months, rising 1.6% month on month.

FINSUM: Seeing evidence that consumers still look healthy is a testament to the fact that the underlying economy still looks strong.