Aug 28, 2019

U.S. consumers remain historically confident

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Data: The Conference Board and University of Michigan; Chart: Axios Visuals

The continued bright spot in global economic data has been the solid state of U.S. consumers. Unemployment is low, and consumers are confident and continue to spend freely, providing a major buoy for the rest of the economy.

What they're saying: "Trade, as important as it is, and as many headlines as it engenders, is 3-4% of GDP. Personal consumption is closer to 70% of GDP. And as long as the labor market is strong, wages are OK, and we’re in a non-inflationary environment, the consumer keeps spending," Scott Clemons, chief investment strategist at Brown Brothers Harriman, says in an email.

  • “It’s good to remind one’s self about what the fundamental, underlying drivers of the economy are," Clemons said.

Of note: Both major readings of U.S. consumer confidence remain at elevated levels.

  • However, the University of Michigan survey has been trending lower since May when the U.S.-China trade war began to escalate.
  • The Conference Board's survey has remained near historic highs, with a measure of how consumers view their present situation at the highest since just before the 2000 dot-com bubble crash.

The bottom line: “The trade disputes are like waves crashing on the shore. The economic tide, driven by personal consumption, is still coming in," Clemons adds. "The risks of recession are way overstated, given the strength of the consumer."

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Tariffs start to dent consumer sentiment

Data: University of Michigan Surveys of Consumers; Chart: Axios Visuals

Consumer sentiment fell to its lowest level since October 2016 and dropped by the most since December 2012, according to a survey by the University of Michigan.

Why it matters: The decline in sentiment was attributed largely to negative references to tariffs and the U.S.-China trade war, said Richard Curtin, the survey’s chief economist. Tariffs were mentioned "spontaneously" as a negative force by 1 in 3 respondents.

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Consumer confidence tumbles, but remains historically high

Data: The Conference Board; Chart: Axios Visuals

The stock market was also stung by a weak U.S. consumer confidence report from the Conference Board on Tuesday.

By the numbers: The index fell to 125.1 in September from a downwardly revised 134.2 in August. That was the biggest drop in 9 months, and the most the index has missed versus economists' expectations since 2010, according to Reuters.

Go deeperArrowSep 25, 2019

America's consumers are happy but its CEOs are scared

Illustration: Sarah Grillo/Axios

The Business Roundtable on Wednesday announced that CEO confidence fell to the lowest level in 3 years — a doom-and-gloom indicator that contrasts the high levels of consumer optimism.

Why it matters: Top executives are feeling the pain from the trade war, prompting them to hold off on spending decisions that propel economic growth. Consumers, so far unshaken by tariffs and similar threats, could be the economy's saving grace.

Go deeperArrowSep 19, 2019