Mixed bag of data this morning depending on how you want to interpret things. Retail sales were mixed with discounters performing well and high end retailers performing poorly. The U.S. consumer continues to keep spending under wraps and is very price conscious when they do buy goods and other items. This morning’s retail sales data was another sign that the cash for clunkers is going to detract from sales for months to come. This is by far the most worrisome component of anyone’s v-shaped recovery thesis. The U.S. consumer is simply not coming back as fast as many would like.
Jobless claims continued to trend sideways at 570K. Continuing claims shot higher to 6.23MM. This is continuing bad news for U.S. consumers. 570K claims and 6.23MM continuing are truly remarkable figures for an economy that is supposedly on the mend. This doesn’t bode well for a consumer recovery. Perhaps most alarming is the sideways movement. This likely means we’ll see little to no change in overall job losses tomorrow while the market expects a 10% decline in job losses. Don’t be shocked if we see a figure very close to last month’s 247K….
ISM manufacturing was essentially in-line at 48.4. Econoday reports:
But there are definitely signs of improvement that point to a plus 50 reading for the composite index perhaps as soon as next month. Prices jumped 22 points to 63.1, a gain, especially given flat fuel prices, pointing to rising demand for inputs. Business activity, akin to a production index, showed an actual month-to-month increase in August, up more than 5 points to 51.3. This index on the manufacturing side rose above 50 in June, by the way matching that month’s cyclical pivot higher in total U.S. manufacturing sales.
The composite index attempts to anticipate GDP and these results may temper related estimates which have been climbing to as much as 4 percent for next year. But the coincident indicators in this report — the prices index and business activity index — point to ongoing expansion. Yet the headline was weaker than expected, pushing stocks and commodities lower.
All in all, it’s a fairly worrisome set of data for anyone who believes the consumer is going to rebound to their old habits and save the economy. Thus far, there are little to no signs of such a thing occurring.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.