Latest / Markets with Megan: A Quick Financial Markets Update / Is the Consumer Warning the Fed? | S2 E069 | 08-26-25

Transcript

Is the Consumer Warning the Fed? | S2 E069 | 08-26-25 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Speaker 1: The consumer may be trying to tell the Federal Reserve something.
• 0:04
  Speaker 1: It is Tuesday, august the 26th, and this is Markets with Megan.
• 0:07
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• 0:09
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• 0:10
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• 0:13
  Speaker 1: But, as always, we're here today to break down that economic data that we get, and this morning we got information on the consumer, specifically from the conference board and their view on consumer sentiment for the month of August.
• 0:25
  Speaker 1: What we saw was that the reading came in a little bit better than expected and it was upgraded in July.
• 0:31
  Speaker 1: Now, because of that July upgrade, august number was slightly lower than July.
• 0:38
  Speaker 1: July was a six-month high and it was let a little bit lower by both the situation and the expectation components of this index.
• 0:46
  Speaker 1: It does confirm our view that the consumer is still stretched.
• 0:50
  Speaker 1: The consumer is getting concerned and they're likely going to be cautious as we go into the remaining months of 2025.
• 0:57
  Speaker 1: Now, the weakness was mainly led by those Americans that are under the age of 35.
• 1:03
  Speaker 1: So that was interesting from the age demographic.
• 1:06
  Speaker 1: When you look at the income level, the confidence dropped in both those earning between $50,000 and $125,000 and those earning above $125,000.
• 1:18
  Speaker 1: The lowest income level actually saw a modest increase.
• 1:22
  Speaker 1: Now what the Fed is going to be concerned about and what the consumer is trying to tell them is, again, their dual mandate is in trouble here.
• 1:30
  Speaker 1: First of all, the consumer still is very concerned about inflation.
• 1:33
  Speaker 1: Their 12-month expectation for inflation jumped to 6.2% on average, and that's a three-month high.
• 1:40
  Speaker 1: So again going in the wrong direction.
• 1:43
  Speaker 1: But when you look at the other side of the Fed's mandate, the labor market is showing some more cracks here.
• 1:49
  Speaker 1: There's a component in this index that's called the jobs plentiful and it subtracts out the jobs hard to get and it takes that survey information.
• 1:57
  Speaker 1: When that number is lower, it means that Americans are thinking there's less jobs that are out there less plentiful jobs out there than there are for them hard to get, and we did see that drop.
• 2:09
  Speaker 1: It's now at a February 2021 low.
• 2:14
  Speaker 1: Also, when you look at consumers from the income expectations, we did see a modest uptick in those that are concerned about their income levels over the next year.
• 2:26
  Speaker 1: So the consumer is showing more signs here of strain, telling the Fed we're really worried about the labor market, but at the same time they're very worried with inflation.
• 2:36
  Speaker 1: A 6.2% average inflation number is concerning for the Fed.
• 2:40
  Speaker 1: That's because if consumers think prices will be higher in the future, they may be inclined to spend now, before those prices rise, and what that does is just create this vicious circle of inflation, and consumers don't necessarily realize that's what's happening.
• 2:56
  Speaker 1: That's all we have today.
• 2:58
  Speaker 1: The markets are relatively quiet today.
• 3:00
  Speaker 1: They're really waiting for the big reports which are later this week.
• 3:04
  Speaker 1: We'll get NVIDIA's earnings tomorrow, on Wednesday, and then the Fed's preferred inflation indicator on Friday, the PCE core.
• 3:11
  Speaker 1: If you like this podcast and want a history, you can go to marketswithmeganfm.
• 3:15
  Speaker 1: Thank you,