Tuesday, January 20, 2015

Don’t Bet Against US Consumers (excerpt)

Last week, I put a positive spin on the disappointing retail sales numbers. I noted that despite the downward revisions in October and November and the decline in December, the first two months of Q4 were strong enough, and inflation was low enough during the quarter, to boost inflation-adjusted retail sales (including gasoline) by 7.7% (saar) last quarter. I assumed a 0.8% m/m drop in consumer goods prices during December. In fact, the goods CPI was down 1.2%, raising the quarter’s growth rate to 8.3%.

The Consumer Sentiment Index soared during the first half of January. The overall index jumped from 93.6 during December to 98.2 this month, the highest reading since January 2004. Both the expectations and present situation components soared this month. Solid employment gains along with rising confidence suggest that consumers have the means and the will to spend.

Today's Morning Briefing: Shanghai Chaos. (1) The trauma of 2008 still haunts investors. (2) Another dip, or worse? (3) Nothing to fear but volatility in commodity, financial, and forex markets. (4) Yes, we know, stock investors hate volatility. (5) There may be more downside in oil price, and more risk in energy junk bonds. (6) Iran’s president wants a vote. (7) Did Shanghai Chaos sell copper? (8) Negative interest rates in the Eurozone, Switzerland, and Japan. (9) Flattening yield curves signal secular stagnation abroad, not in US. (10) More chaos in currencies. (11) Grexit: Part II. (12) Don’t bet against US consumers. (13) How much will strong dollar hurt earnings? (14) “American Sniper” (+ +). (More for subscribers.)

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