Consumer confidence is typically our "first look" at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels--today’s were the worst in 27 years--then it is a flashing red-light about the economy.
There wasn’t anything good about today’s numbers. Every part of the survey was awful. On jobs, the optimistic folks who say jobs are plentiful fell to 3.6 percent from 4.4 percent. The pessimistic people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. The gauge of expectations for the next six-months fell to 63.8, from 77.3 the prior month. The share of people who believe their incomes will increase over the next six months fell to 9.5 from 11 percent. The share of those expecting more jobs fell to 12.4 percent from 15.8 percent.
The message: the economy sucks.
The recovery we were supposed to have.
You’ll read a lot about how the consumer confidence numbers are a lagging indicator. Indeed, they are a lagging indicator when measured against the stock market. The real time data conveyed by the stock market is often a better indicator than any survey or government data. But that doesn’t mean you shouldn’t pay attention to the consumer confidence number, especially since stocks have declined for most of this year.
Lets be clear here. The story-book recovery was dependent on a recovery of the consumer and a decline in the saving rate. If consumers lost some of their apprehension about future income prospects and future employment, they might begin to spend more on both retail goods and to purchase homes again. Anticipating this return of the consumer, businesses would increase capital spending and inventory.
Just after Hugo Chavez devalued the Venezuelan currency by 20%, he declared that companies weren’t allowed to raise their prices. Yet this would be an economic impossibility for any business. No business is sustainable if its profit margins are negative.
As a result of this reality, it appears food retailers were caught in the mix trying to raise prices, and taken over.
Albuquerque Express: Government inspectors in Venezuela have closed many shops this week after the owners were accused of trying to manipulate last week’s currency devaluation.
A group of supermarkets and other businesses across Venezuela have quickly been taken over by the tax inspectors for allegedly speculating and changing the price of products.
Superstores belonging to the Exito supermarket chain were the first to be acquired by the government.
Given the Venezuelan government’s track record for running companies, expect food shortages ahead. Really. Just look at the energy industry for cues. Oil-rich Venezuela has been forced to impose rolling black outs on itself.
By devaluing its currency while simultaneously preventing commensurate price increases for food, Venezuela has created huge disincentives for production. While Venezuela’s energy shortages are pretty sad already, food shortages would be plain scary. Venezuela continues to read like an Ayn Rand novel.
Shown below is a retail proxy, the Retail HLDRs Exchange Traded Fund (RTH). It’s outperformed the S&P500 on a three month basis. Yet Best Buy’s (BBY) warning today, that revenue will be driven by lower-ticket items in the fourth quarter, could mean that the pre-Christmas retail rally shown below is toast.
Note how Best Buy dropped a nasty 7% on just these decent earnings. A lot of holiday cheer is already priced-in.
In a sign that the new normal in consumer spending continues unabated, upper-income Americans’ self-reported average daily spending in stores, restaurants, gas stations, and online fell 14% in November, reverting to its relatively tight ($107 to $121) pre-October 2009 average monthly range. Middle- and lower-income consumer discretionary spending increased by 7% last month but remained in its tight 2009 average monthly range of $52 to $61. Still, consumer spending by both income groups continues to trail year-ago levels by 20%, even as those comparables have gotten easier to match — possibly dashing hopes that upscale retailers and big-ticket-item sales will do better this year.
[click on charts to enlarge]
Spending By Income Level
Spending vs. Year Ago
The hope was that the surge on Wall Street and the seeming stabilization of housing values had encouraged some upper-income consumers to abandon the 2009 spending new normal. November’s results dashed these hopes, as upper-income consumers joined their middle- and lower-income counterparts in spending 20% less than they had during the financial crisis days of 2008 and returning to the relatively tight 2009 daily spending range for this group prior to October.
Spending New Normal
The year-over-year differences have declined somewhat during recent months, but much of this closure in the 2008-2009 spending gap is a result of the easier spending comparables from last year’s financial crisis.
On a national level, the spending new normal suggests slower economic growth than otherwise might be expected in the years ahead.
While the spending "new normal" may not be good for the larger economy in the short-term, it may be seen as a strong positive for individual consumer households. Consumers, like their business and banking counterparts, would be well-served to de-leverage by spending less, saving more, reducing their use of credit, and thereby strengthening their personal balance sheets. While this may not provide the immediate-term returns to the economy of the over-leveraging of recent years, a financially stronger U.S. consumer implies only good things for the longer-term
If local media reports are accurate, shoppers have turned out in huge numbers across the country for Black Friday.
We did a survey of local news sites to gather the latest Black Frdiay news. And it looks very good for retailers.
Cincinnati, Ohio: "A long line of shoppers looking for the best priced toys for Christmas waited outside a Western Hills Toys R’ Us store on Glenway Avenue, since late Thursday night to be among the first in line. After the doors opened at 12 a.m., there were some reports that Cincinnati police had to be called to bring order to a disorderly line of shoppers. Some of them said an argument between several groups of shoppers got out of hand and forced the police to called for help…At the new Wal-Mart superstore in Fairfax on Red Bank Road, over a thousand people came early Friday morning, to be in the right line to get some of the doorbuster sales the chain was offering…Many retailers warn that they have severely cut back on what they have ordered."
Weston, Wisconsin: "The line leading to Target in Weston stretched at least three blocks as people got ready for Black Friday shopping Friday."
Framingham, Massachusetts: "Dondrae May, a manager at Best Buy’s Framingham, Mass., store, said shoppers started lining up at 4 p.m. Thursday for the 5 a.m. opening for the limited early morning specials like the $299 32-inch Dynex flat-panel TV.
He noted that crowds were larger than last year and that shoppers were filling their basket with more items than a year ago, when they were shellshocked following the ballooning of the financial meltdown. The biggest draws were laptops, TVs and GPS systems, he said."
Aurora, Illinois: "Black Friday shoppers got an early start this year, causing a 2-mile traffic back-up near Chicago Premium Outlets in Aurora…Starting about 11 p.m. Thursday, cars began lining up to get into the mall, according to Illinois State Police…The mall opened at midnight, and the heavy traffic remained for several hours, State Police said."
What was initially said to be a coordinated attack killing 9 and wounding 27, involving up to three gunmen has since been attributed to a lone, 18-year-old German-born male student with both German and Iranian citizenship, identified moments ago as David Ali Sonboly. As authorities try to piece together the motive behind the latest mass killing, the third one in Europe in the past 9 days, and one which targeted mostly other young people, the emerging picture is that of a mentally disturbed young man with an obssession for killing sprees, and who had undergone psychiatric treatment.
The global rally in equities Moderated last week. The average gain of the eight indexes on our world watch list was a respectable 0.41%, down from the previous week's steroidal 3.87% average. Hong Kong's Hang Seng was the top performer with a 1.41% advance. At the other end, the chronic laggard Shanghai Composite fell 1.36%.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the compara...
U.S. stocks rose, sending the S&P 500 Index to a record, and the dollar strengthened as speculation mounted that central banks from Japan to Europe won’t be in a rush to add to unprecedented stimulus. Emerging-market assets and commo...
The Dow just scored 7 straight all-time highs; are there more on the way, or is the air getting too thin?
When the major U.S. stock averages broke out to new highs earlier this month, the key consideration became would the breakout fail or would the new highs stick? Well, 10 days later the breakout gets high marks for follow through. This is particularly so in the case of the Dow Jones Industrial Average (DJIA). As many averages have spent the past several days digesting recent gains, the DJIA has continued its ascent. In the process, the index has recorded 7 straight all-time highs.
While the streak is not unprecedented, it is just the 12th such run in the past 10...
By Jacob Wolinsky. Originally published at ValueWalk.
Relypsa Inc (NDAQ:RLYP) — to be acquired by Galenica AG (VTX:GALN) for $32 per share in cash is soaring this morning up about 58 percent at the time of this writing in early morning. On the other hand shares of Galenica are down on the announcement by about 8 percent. What are the details of the deal? Here is what the sell side analysts are saying about the pharma news.
Relypsa Inc (NDAQ:RLYP) bid – analysts react
Relypsa will be acquired by Galenica for $32 per share, a 59% premium over the last closing price. We have thought that Relypsa would likely be acquired at some point, given the opportunity to grow Veltassa to be a significant commercial brand, ...
Companies around the world are exploring blockchain, the technology underpinning digital currency bitcoin. In this Blockchain unleashed series, we investigate the many possible use cases for the blockchain, from the novel to the transformative.
Most people agree we do not need to know how a television works to enjoy using one. This is true of many existing and emerging technologies. Most of us happily drive cars, use mobile phones and send emails without knowing how they work. With this in mind, here is a tech-free user guide to the blockchain - the technology infrastructure behind bitcoin...
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After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
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Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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