The bullish American consumption story is showing cracks: Morning Brief

Thursday, September 12, 2019

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The consumer is beginning to worry

The American consumer has been bolstering economic growth throughout the trade war. In Q2, personal consumption expenditures – which represents 70% of GDP — jumped 4.7%. And bolstering the consumer has been a labor market creating over 100,000 jobs almost every month for nearly a decade.

But that narrative may be changing.

In August, the U.S. economy added just 130,000 jobs. The three-month moving average now sits at 156,000, down from 241,000 a year ago.

“We’re seeing a deceleration in job growth,” Bank of America Merrill Lynch (BAML) economist Joe Song said on Yahoo Finance’s The Ticker. “We are starting to see some concerning signs that the economy is starting to slow. And we are returning back to trend... We’re already in a fragile environment, and you have concerns about the trade war actually spilling over into the broader domestic economy. So we’re a bit concerned.”

Citing new spending data on Wednesday, BAML economists wrote: “The consumer is beginning to worry.” BAML’s economics team sources their insights from the bank’s credit and debit card activity.

“After a strong month of spending in July, consumers tightened the strings of their wallets in August,” they said. “Based on the aggregated BAC credit and debit card data, retail sales ex-autos fell 0.5% month-over-month seasonally-adjusted.”

August had its fair share of distortions. July promotions — highlighted by Amazon Prime Day — likely pulled forward some sales out of August. And the threat of Hurricane Dorian had consumers hoarding more essentials than usual. The underlying data is still worrisome.

“Bottom line: our data show that August was a difficult month for the retailers,” the economists said.

This puts all eyes be on the official August retail sales report, set to be published by the Census Bureau on Friday morning.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Earnings

Pre-market

• 8 a.m. ET: Kroger (KR) is expected to report adjusted earnings of 42 cents per share on $28.35 billion in revenue during the second quarter, according to data compiled by Bloomberg.

Post-market

• 4:15 p.m. ET: Broadcom (AVGO) is expected to report adjusted earnings of $5.13 per share on $5.52 billion in revenue during its third quarter.

Economy

• 8:30 a.m. ET: CPI month-on-month, August (0.1% expected, 0.3% in July); CPI excluding Food & Energy month-on-month, August (0.2% expected, 0.3% in July); CPI year-on-year, August (1.8% expected, 1.8% in July)

• 8:30 a.m. ET: Initial Jobless Claims, week ended September 7 (215,000 expected, 217,000 prior); Continuing Claims, week ended August 31 (1.675 million expected, 1.662 million prior)

• 9:45 a.m. ET: Bloomberg Consumer Comfort, week ended September 8 (63.4 prior)

• 2 p.m. ET: Monthly Budget Statement, August (-$197.5 billion expected, -$119.7 billion in July)

From Yahoo Finance

• Yahoo Finance, in an exclusive media partnership with diversity and inclusion network INvolve, unveiled the HERoes Women Role Model Lists 2019. Check out the full list as well as our exclusive interviews and features.

• Editor-at-large Brian Sozzi will talk to the CFO of SmileDirectClub, which will debut on the public markets today.

• Editor-in-chief Andy Serwer interviews former United States Ambassador to the United Nations, Samantha Power, for his weekly Influencers series at 5 p.m. ET.

Read more

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President Donald Trump talks with reporters after receiving a briefing on Hurricane Dorian in the Oval Office of the White House, Wednesday, Sept. 4, 2019, in Washington. American farmers have not just endured retaliatory tariffs from China and other nations. They’ve had to watch as competitors used free trade agreements to make inroads into Japan, a historically protectionist market. (AP Photo/Evan Vucci)

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