Latest / Markets with Megan: A Quick Financial Markets Update / Retail Sales Slowdown Raises Economic Concerns | Episode 147 | 06-18-24

Transcript

Retail Sales Slowdown Raises Economic Concerns | Episode 147 | 06-18-24 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: We've been talking about this for a long time everybody, the consumer and how.
• 0:05
  Megan Horneman: We were concerned that these high prices would eventually strain the consumer and we'd start to see some slowdown in spending.
• 0:12
  Megan Horneman: And we got that.
• 0:13
  Megan Horneman: Today it is Tuesday, June 18th, and this is your regular segment of Markets with Megan.
• 0:18
  Megan Horneman: We had the retail sales report for May and this was a soft report.
• 0:23
  Megan Horneman: Not only did all of the different levels that we look at retail sales come in a bit weaker than expected, but we also saw downward revisions to the prior month.
• 0:33
  Megan Horneman: So why does that matter?
• 0:34
  Megan Horneman: First of all, the last month was April's numbers, so that was the first read we got on retail sales for the second quarter and these are the numbers.
• 0:44
  Megan Horneman: Remember, the consumer makes up the majority of GDP, so now we've got two-week readings in a row for consumer spending for the second quarter.
• 0:52
  Megan Horneman: So this is going to weigh on the GDP estimates.
• 0:56
  Megan Horneman: But let's break down what we saw.
• 0:58
  Megan Horneman: So when you look at where there was some spending declines, Furniture saw a pretty big drop and that was probably attributed to some Memorial Day sales that were out Building materials, gasoline stations we know that Gasoline prices have been weak in all of the reports and then we did see a decline when you look at restaurant spending.
• 1:23
  Megan Horneman: So these are some of the discretionary items that we look at.
• 1:26
  Megan Horneman: Now what does this mean for second quarter GDP?
• 1:29
  Megan Horneman: The three-month average annualized number now is about 1.9% for personal consumption and I'm looking at that true core number where you strip out all the noisy items like food, energy, building materials.
• 1:42
  Megan Horneman: If you look back at the past few quarters from personal consumption, first quarter was about 2% and then that was down from a high of about 3.8% in the first quarter of 2023.
• 1:54
  Megan Horneman: So the current consumer is slowing.
• 1:57
  Megan Horneman: This is going to weigh on growth for the remainder of the year.
• 2:00
  Megan Horneman: The problems the consumer is having right now is that wages are OK, jobs are OK, but we're not keeping pace with the rise we're seeing in certain areas of inflation, like service inflation.
• 2:14
  Megan Horneman: So this is squeezing consumers.
• 2:15
  Megan Horneman: And then you combine that with very high credit card debt and this is problematic for the consumers problematic for the consumers.
• 2:27
  Megan Horneman: Now we think that the Fed isn't going to take too much into this one particular report, because GDP estimates for second quarter are still trending in the positive, are still looking to be positive, but the Fed will be keeping an eye on this and the fact that the consumer is starting to show signs of strain.
• 2:39
  Megan Horneman: This kind of goes along with the report we got last week on the consumer confidence, where we saw that deteriorate quite a bit.
• 2:45
  Megan Horneman: That's all we have today.
• 2:48
  Megan Horneman: Tomorrow, the 19th, is a holiday and it's a very light economic data calendar.
• 2:52
  Megan Horneman: So we'll be back on Thursday with some data on housing and then we will also be back next week when the calendar picks up.
• 2:58
  Megan Horneman: If you have any questions or comments, please feel free to reach out to podcast@verdence.
• 3:01
  Megan Horneman: com.
• 3:02
  Megan Horneman: Thank you.