retail and consumer

Robin Harding

The New York Fed’s latest quarterly report on household credit conditions is quite upbeat and somewhat at odds with the latest senior lending officers survey.

Especially interesting are the data on ‘transitions’, which show fewer new mortgages going bad, and some bad mortgages getting better.

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Ralph Atkins

One lesson drawn from the global economic crises of the past few years is the need to improve financial literacy. But the view that problems could be avoided in the future simply by making sure investors understand into what they are putting their money is challenged in two research working papers just published by the European Central Bank.

The first looks at evidence from the UK and Ireland on what causes people to end up in financial distress and concludes that the problem goes beyond financial literacy and education. Read more

Ralph Atkins

Waiting for a German consumer boom is like… contributions welcome for the most appropriate metaphor. Whatever the comparison, it is not happening yet. Disappointingly for those hoping for a re-balancing, details just released of last week’s fourth quarter gross domestic product data show German growth continued to be driven mainly by exports.

The balance between exports and imports contributed 0.7 percentage points to growth in the fourth quarter. This was offset by a sharp, weather-related fall in construction and a run-down in stocks.

Despite steadily falling unemployment, low interest rates and soaring economic confidence in Europe’s largest economy, consumer spending rose by a measly 0.2 per cent compared with the previous three months, down from 0.5 per cent in the third quarter.  Read more

James Politi

Survey data always needs to be taken with a grain of salt. What people say they will do – or how they feel – does not always correspond to their actions.

But there is little doubt that many Americans, including both average consumers and business leaders- are notably less confident about the economic outlook than they were earlier in the year.

The Conference Board today released its monthly report on consumer confidence, showing a plunge in September from 53.2 to 48.5, its lowest level since February. Meanwhile, the Business Roundtable also published its quarterly CEO outlook, and many American business executives expressed caution about hiring and investing.

Data from the regional Federal Reserve Banks have added to the downbeat mood in recent days, particularly when it comes to one of the drivers of economic growth during this recovery: manufacturing. The Richmond Fed today said manufacturing activity in the mid-Atlantic region pulled back for the first time in seven months, Read more

Ralph Atkins

What did German consumers do at the height of the crisis over eurozone public finances earlier this year? A good many went shopping, according to the country’s statistical office. A detailed breakdown of gross domestic product data for the second quarter shows consumer spending increased by 0.6 per cent compared with the previous three months. That followed three consecutive quarters of contraction.

Thus, private consumption became a positive factor that contributed towards an overall 2.2 per cent increase in second quarter GDP. Although it was not as important as exports or investment spending, that is a big deal for Germany, where consumer spending is notoriously sluggish, even in boom years. Read more

James Politi

I wrote a story in this morning’s paper on a survey that showed pervasive pessimism among American consumers about their economic situation.

71 per cent told AlixPartners, a business consulting group, that they were either worse off or in the same place as they were in May 2009 – and let’s remember that at the time the US economy was shrinking and the private sector was not generating jobs as it is now, albeit slowly, but was losing more than 300,000 positions per month.

The dispiriting survey by Alix caught my attention because it confirms that recovery is eluding most Americans, who are suffering from high unemployment and overleveraged household balance sheets. And the implications of this are huge: consumers are in no position to power the recovery once government stimulus stops later this year. Read more

James Politi

Federal Reserve officials are clearly divided on the inflation outlook.

Money Supply - click for larger image

Money Supply – click for larger image

The hawks still believe a spike in inflation poses the greatest risk to the US economy, given the easy monetary policy that is in place. Meanwhile, the doves, emboldened by recent poor economic data, are increasingly concerned that the US has entered a disinflationary dynamic that could ultimately result in damaging deflation.

The release of the labor department’s consumer price index for the month of June, unfortunately offers something to nibble on for both camps, but no clear direction on who is right.

In fact, while the year-on-year increase in the core CPI – which strips out volatile food and energy costs – is still stuck at historic lows of 0.9 per cent, the monthly increase of 0.2 per cent was more than expected by economists, suggesting that disinflation may be bottoming out. Read more

James Politi

Another day, another bad report on the state of the US recovery.

Today, it was the US Census Bureau’s report on retail sales for June that ended up disappointing economists, showing a 0.5 per cent drop over the month as well as revisions to earlier data. Clearly, US consumers, who had started to spend again quite aggressively in late Winter, have since retrenched, amid persistently high unemployment and weakness in equity markets.

Yesterday, the bad news had been on the trade side, with an unexpected widening of the US trade deficit as imports, particularly from China, outpaced exports. Read more

James Politi

It was a rough day on the economics beat here in Washington. Rough in terms of America’s hopes for a strong economic recovery, that is.

Let’s recap. At 8.30am, the labor department released its weekly jobless claim figures. They were up unexpectedly to 472,000. Back in April, when job creation seemed to gathering momentum, many economists were looking at the stubbornly weekly jobless claims data as an aberration. Eventually, the numbers would have to move closer to 400,000. But now, the opposite seems true and private payroll growth looks destined to be modest, with persistently high unemployment and therefore high jobless claims. We’ll know more tomorrow from the more important monthly government jobs report, but still, the labour market outlook is not rosy.

Then, at 10am, a double punch in the face. The ISM manufacturing index dropped a lot more than expected in June, suggesting that one of the bright stars of the recovery is beginning to fade. Most economists knew that after inventories were restocked, there would be some loss of momentum. Read more

James Politi

Today US economists received the latest reminder of how imperfect some of the consumer surveys really are.

The Conference Board’s consumer confidence survey today showed a sharp drop in June, to 52.9 from 62.7 in May. There are plenty of good reasons for the drop, which Federal Reserve officials pointed out in their monetary policy statement last week, including the reluctance of employers to hire new workers and a troubled housing sector. Plus, there is the sovereign debt crisis in Europe and even the disconcerting oil spill in the Gulf of Mexico.

But why, in that case, did the University of Michigan’s consumer sentiment survey only last week show confidence at its highest level since January 2008 ? Read more

Simone Baribeau

The White House is highlighting common problems of military families to push for more comprehensive financial reform.

Barack Obama today argued against an amendment which would exclude auto dealer lenders from increased consumer protections (that will be overseen by the Fed).

This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers. Unfortunately, countless families – particularly military families – have been the target of these deceptive practices.

Last month, the White House blog included a post on military families being the potential victims of the proposed auto lending carve out, which said that, in the past six months, 72 per cent of military financial counselors had spoken with soldiers on abusive auto lending practices.

Dealers that target military families have an incentive to Read more

James Politi

Are US consumers falling back into the same old spending patterns that got them into so much trouble in during the recession?

Data released today showed that the US savings rate fell to an eighteen-month low of 2.7 per cent in March, as Americans spent more than they earned: consumption rose by 0.5 per cent, much faster than a 0.3 per cent increase in personal income. Read more

James Politi

Buoyant US economic data has revived a debate over the shape of the US recovery.

In congressional testimony this week, Ben Bernanke made clear he thought the risks of a “double-dip” recession, while “not negligible”, had fallen in recent months. Read more

No recovery until 2011 or later: this is the base case of 31 top retail executives, including Sir Stuart Rose and Peter Marks, CEO of the Co-operative Group. The retailers also expect inflation, a hike in the VAT rate and increasing mergers and acquisitions in the industry, shows The long and winding road, a report by Sarah Butler for Kreab & Gavin Anderson.

Today’s European confidence figures, by contrast, are mostly up, driven by bullishness in the industrial sector. A lower euro is helping producers. But lower sterling is having the opposite effect on retailers. “Sterling has weakened and that will feed through to non-food prices because of Read more

Ralph Atkins

Germans love a trade exhibition, or Messe, but the giant Cebit information technology fair in Hanover, has long had a special place in their hearts.

Travelling to the north German city in the late 1990s, I was bewildered (horrified?) by the sheer scale of the enterprise – the biggest IT exhibition in the world. More than 7,000 exhibitors filled the equivalent of 90 football pitches, and built upwards as well: some stands were four storeys high and including their own restaurants. Even if you understood German, the tech-speak was impossible to follow.

Cebit said a lot about the German economic thinking at that time. The idea then was that somehow the country could keep pace with the US. Read more

The Kuwaiti parliament has approved a bill that is extremely unpopular with both the government and the central bank. If passed into law, the bill could force the government to buy all $23.3bn of consumer loans in the country, write off the interest and reschedule the payments.

The government plans to ask the emir, Sheikh Sabah al-Jaber al-Sabah, to reject the law, and the central bank has said the bill includes legal and technical violations and cannot be applied. The government has bailed out indebted nationals twice before, once after the 1982 stock market crash, and again after the 1991 Iraqi occupation. Read more

Ralph Atkins

French consumer spending is helping the country gain an edge over eurozone rivals, writes Ralph Atkins in a Financial Times blog Read more

Jobs data looks healthy in Brazil and the square mile, but less rosy for manufacturing workers and journalists, although wage data may be good for those employed, whatever the sector. Commodities are ever more popular and gold could surge if China bans exports Read more

Krishna Guha

At the risk of stating the obvious, I don’t think the Fed was expecting August retail sales to come in quite as strong as they did. One month’s data is not going to change the forecast very much, as Bernanke’s comments at Brookings imply. Still, it is interesting to think about this in the context of the savings rate.

Most Fed officials think the savings rate will stick roughly where it is now – about 4.5 per cent. Some see a serious risk that the savings rate will move higher in the coming months; others are pretty confident it will stay about where it is now. None of them as far as I can see are expecting the savings rate to dip lower from here. If – and it is a very big if - a run of data suggested that was happening it would have a big impact on the way policymakers think about the outlook into 2010.

Well-being should be reflected in economic data, a commision will report today. This as the OECD sees positive signs in the world economy but retail data – and an escalating trade war – suggest otherwise Read more