One of the big themes of the year has been the split between nervous corporates and confident consumer, with the latter holding up the economy.
But a few datapoints point to some weakness there.
Millan Mulraine of TD Securities describes today’s Personal Income & Spending report:
Consumer spending activity declined for the first time since May, posting an unexpected 0.2% m/m drop after rising briskly in the previous three months. Real spending was also quite weak, declining by 0.3% m/m, marking the biggest decline in this indicator in some time. And despite the very strong hand-off from September, the weak performance in October suggests that consumer spending activity is unlikely to provide any meaningful boost to economic activity in Q4.
The internals of the report were largely weak, with spending on durable (down 0.8% m/m) and nondurable (down 0.2% m/m) goods both lower on the month. The weakness in spending on goods was partially offset by higher expenditures on services, which rose by 0.1% m/m, though this is a marked slowdown from the 0.3% m/m gain in September. On the inflation front, there were quite encouraging news for the Fed, as the pace of core PCE inflation remained relatively contained at 0.1% m/m following a similar performance the month before. Annually, the pace of core inflation remained unchanged at 1.6% y/y, underscoring the relatively favourable backdrop for the Fed’s accommodative monetary policy stance.
Then there was yesterday’s GDP revision.
Joe LaVorgna of Deutsche Bank describes how although the headline was stronger, the internal consumption number was weak:
Both consumption as well as equipment & software spending (capex) were revised down, the former is now +1.4% from +1.9% previously and the latter is -2.7% from an unchanged reading previously. This was the first decline in capital spending (capex) since the economy was in recession (-8.5%). No doubt, it reflected profound uncertainty related to the presidential election and the impending fiscal cliff. With the latter situation still unresolved, and with October core durable goods shipments soft, it is unlikely we will see much if any bounce in capex this quarter. Moreover, it is possible that the hurricane further dampens consumer spending, at least temporarily. We will know more after the October personal consumption data are released, as this will give us a complete picture of the consumer.
Then Gallup came through with this ominous number about holiday shopping:
WASHINGTON, D.C. — Self-reported U.S. consumer spending in stores, restaurants, gas stations, and online averaged $67 per day in the week ending Nov. 25, including Black Friday weekend. This is down from $83 a year ago and the $79 comparable for 2010, and essentially matches the 2009 weekly comparable of $69.
There’s a lot of noise in data, and of course there’s Sandy and all that. But this is a trend worth being concerned about.