Lots of data on retail spending and consumers was coming out yesterday. None are going to move the market like the jobs report on Friday, but at two-thirds of the economy, the consumer reaching the crossroads is the biggest story. As much greatness rests in the DNA of Americans, shopping is a national pastime, even when other parts of the economy are dragging. If indeed we are going to continue to spend like we've always spent, then our paychecks have to improve or we'll have to start using more credit. The Federal Reserve and government want us to spend money we don't have, which is one of the reasons for low interest rates, as it dissuades savings and makes it cheaper to say "charge it."
According to Gallup, Americans spent more money on a daily basis in May than any other month in the past six years. This is huge, but where's the cash coming from? At some point, as confidence inches higher, people will probably borrow more and use their credit cards for purchases rather than use debit cards. That will begin an initially upbeat period as it stirs the economic pot, but if human nature kicks in, as it does from time to time, we will begin the boiling-over period. It's a long ways off, but it is the price we pay for an economy with too much manipulation.
All these government schemes and money printing simply distort the picture and mask true goals of social engineering (government) and protecting the ultra-wealthy (Fed).
For the most part the increase in income has outpaced spending, but consumers really clammed up in April after, perhaps, overdoing it in March, but for whatever reason, consumers saved more and shopped less.
This morning we are seeing signs consumers are back in the spending mode.
ICSC-Goldman Sachs Store Sales
- Week to week +2.1%
- Year to Year +3.1%
- 4-Week average +2.9% (best pace in a year)
We'll keep an eye on retail and retailers all morning, and also auto sales, which have gotten off to a rousing start with Chrysler blowing away consensus estimates, driven (get it?) by record demand in the Jeep segment. Sales for last month at Chrysler were up 17%; far exceeding the 14.4% anticipated by analysts.
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More importantly than company sales, the annual rate of sales for the industry soared to 16.9 million vehicles, while consensus was 16.1 million.
(Auto sales and student loans are the only Main Street areas where cheap Fed money has made an impact for the former, it helped when the average car was 12-years-old, and for the latter it helps when the federal government is giving away loans and enabling the arrogant climb in tuition costs.)
Equities are still indicating to open lower this morning, although that could change once trading begins. Of course the level of anxiety increases as we get closer to the jobs report on Friday.
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