Macro Update: Inflation Hits Consumer Confidence
Looking at Consumer Sentiment, Housing Data and U.S. Mobility
Our last Macro newsletter provided a short primer on commodities. This week’s newsletter takes a look at various macro-level data including consumer sentiment, building permits and U.S. mobility.
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Consumer Sentiment:
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
Preliminary results for May show a decline in consumer confidence due to inflation concerns as survey data showed the weakest real income expectations in five years. A powerful combination of record savings, pent up demand and supply chain constraints are expected to propel prices higher, and consumers are anticipating the highest year-ahead inflation rate in the past decade. You can read more about this in our deep-dive into inflation, which explains how Federal Reserve policy may contribute to non-transitory inflation.
Source: University of Michigan
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 flat, up just 0.3% from the revised March 2021 rate, but 60.9% above the April 2020 rate. Housing starts slid 9.5% below the revised March estimate, but jumped 67.3% above the April 2020 rate. Privately-owned completions dipped 4.4% below last month’s estimate but were 21.7% above the April 2020 rate.
Despite the April 2020 figures suggesting significant YoY growth, the numbers were heavily skewed due to the impact of the COVID-19 pandemic and therefore don’t provide a reliable annual benchmark. Housing starts came in at a seasonally adjusted rate of 1.57 million, substantially below the economist forecast of 1.71. The sharp drop in housing data comes due labor shortages and supply constraints for vital materials like lumber, scrap steel and gypsum drywall which continue to put pressure on homebuilders across the U.S.
Source: United States Census Bureau, chart created by The Macro Mail
U.S. Mobility:
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
Parks
Transit Stations
Workplaces
Residential
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 climb across the board, with foot traffic for grocery and pharmacy returning to pre-COVID levels. Mobility in workplaces and transit stations is at its highest level since March 2020. With cities like New York expected to reopen from tomorrow and close to 50% of people in the U.S receiving their first dose of the vaccine, mobility can be expected to climb going forward. The new COVID variant from India has alarmed people, with preliminary studies showing that it is more contagious than other variants and may be able to evade some protections provided by vaccines. However, experts have reassured that high vaccination rates and a fairly underwhelmed healthcare system should allow the U.S to take the variant in its stride without significant impediment to reviving mobility rates.
Things We’re Reading:
“Bitcoin: Focus on the Halving Cycle” - The Lykeion
“When Everyone Zigs, It's Time to Zag” - GRIT Capital
“Janet Yellen and Doge are Saying the Same Thing” - Kyla Scanlon
“The Ultimate Guide to Inflation” - Lyn Alden
“This Is What Inflation Would Look Like Without Used Cars and Trucks” - Bloomberg
Disclaimer: All material presented in this newsletter is not to be regarded as investment advice, but for general informational purposes only. You are solely responsible for making your own investment decisions. Owners of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority. By reading and using this newsletter or using our content on the web/server, you are indicating your consent and agreement to our disclaimer.