Macro Update: Consumer Sentiment On The Rise
Our last Macro Update broke down Biden’s $1.9 trillion stimulus package. This week’s newsletter discusses rising consumer sentiment, mobility trends and the slowing housing sector. Subscribe now to never miss an update.
Source: University of Michigan, chart created by The Macro Mail
Consumer sentiment tends to lead the consumption of consumer discretionary goods, with confident consumers ultimately driving earnings throughout the broader economy. As such, the University of Michigan Consumer Sentiment Index is a useful leading indicator of corporate performance.
Source: University of Michigan, table created by The Macro Mail
Consumer sentiment rose to its highest level in a year as vaccinations continue to ramp up across the U.S and a new wave of stimulus checks were rolled out. The gains in sentiment were distributed across the U.S. population, with the largest gains seen among those aged 55 or over, and those in the bottom third of household incomes. According to the survey, consumers expect inflation and interest rates for mortgages and other loans to rise for the year. Despite this, the data suggests that consumer spending will rise for the year ahead with the strongest growth concentrated in services including travel and dining.
New Residential Construction:
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly release seasonally adjusted housing statistics every month. The housing market is a major component of the business cycle and is integrally linked to the financial sector and consumer confidence.
Authorized building permits, which tend to lead overall housebuilding, were 10.8% below the revised January 2021 rate, but 17% above the February 2020 rate. Housing starts slid 10.3% below the revised January estimate and 9.3% below the February rate.
The sluggishness in housing comes as rising lumber, material and labor costs, and severe winter chills in the south of the U.S. have put pressure on homebuilders to deliver. Additionally, according to the University of Michigan survey, consumers expect interest rates on mortgages and other loans to rise and anticipate lower spending on housing, which may put a dampener on the sector’s incredible run-up in the past 12 months.
Source: United States Census Bureau, chart created by The Macro Mail
Google’s mobility reports provide a comprehensive insight into how consumers are acting under COVID-19 lockdown measures. The data shows mobility trends in the following areas:
Retail and Recreation
Grocery and Pharmacy
The data is presented as an index, with a baseline derived from average mobility for that day of the week from the 5‑week period between January 3rd and February 6th, 2020.
Source: Google Community Mobility Reports, chart created by The Macro Mail
U.S. mobility continues to rise across the board with normalized mobility for retail & recreation hitting their highest levels since August 2020. With consumer sentiment hitting its highest level in a year and employment on the rise, we can afford to be optimistic. Consumer excess savings have notched above 6% of U.S. GDP and are set to power future growth, so this is great news for business and the consumer economy.
Things We’re Reading:
“The Long-Term Dollar Shortage” - Lykeion
“Running Low: The 2020 Test for Bonds as Hedging Assets” - DE Shaw & Co.
“Will Housing ETFs Suffer on Weak US Housing Starts in February?” - Nasdaq
“The world’s consumers are sitting on piles of cash. Will they spend it?” - The Economist
“THE FED IS... 'A Joke That You Must Take Seriously'“ - Grit Capital
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