Trade tariffs trash talk is terrorizing America consumer confidence bigly as consumers no longer need tea leaves to see what lies ahead for their pocketbooks this coming holiday season, and beyond.
Two major consumer confidence surveys confirm the decline in consumer confidence in August and two more surveys due out by next week will likely provide further confirmation.
After an erratic first three months of 2019, Americans went on a buying spree in April and May, racking up a ton of new credit card debt, but the reality of a Trump Recession began to set in this summer with 401k anxiety, a rate cut, talk of a small paycheck boost, and tons of bad economic news outside the U.S.
Additionally, credit card activity, which is way ahead of government figures, reveal downward trends in global spending, spikes in new debt, rising delinquency and losses, forcing card issuers to boost loan loss reserves for the near-term, notes Robert McKinley, Senior Analyst for CardTrak, CardData and CardFlash.
There is also evidence Americans are slipping on car and mortgage payments this summer.
National Consumer Confidence
The Conference Board Consumer Confidence Index slipped slightly in August after a little bump in July and a little slump in June. The Index now stands at 135.1. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – increased from 170.9 to 177.2, its highest level in nearly 19 years. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined from 112.4 last month to 107.0 this month.
While other parts of the economy may show some weakening, consumers have remained confident and willing to spend. However, if the recent escalation in trade and tariff tensions persists, it could potentially dampen consumers’ optimism regarding the short-term economic outlook notes Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
Other Conference Board findings for August: The percentage of consumers claiming business conditions are “good” increased from 39.9% to 42.0%, while those saying business conditions are “bad” decreased from 11.2% to 9.8%. Consumers’ appraisal of the job market was also more favorable. Those saying jobs are “plentiful” increased from 45.6% to 51.2%, while those claiming jobs are “hard to get” declined from 12.5% to 11.8%.
National Consumer Sentiment
The preliminary August Survey of Consumers, by the University of Michigan, reports its Index of Consumer Sentiment (overall) declined in early August to its lowest level since the start of the year. The early August losses spanned all Index components. Although the Expectations Index recorded more than twice the decline in August as the Current Conditions Index, the Current Conditions Index fell to its lowest level since late 2016. Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects.
The University of Michigan observed consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%. Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases. The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession. Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession.
Florida Consumer Pulse
The latest University of Florida Consumer Sentiment index reported an increase among Floridians in July 3.7, but its August report will be released shortly. All five components making up the index increased.
Floridians’ opinions of their personal financial situation now compared with a year ago increased 3.6 points from 93.2 to 96.8, though opinions varied greatly by demographics; male respondents and those under age 60 reported less- favorable opinions. Similarly, opinions as to whether now is a good time to buy a major household item like an appliance increased 3.2 points from 100.3 to 103.5, though men reported less-favorable opinions.
“Overall, these two components showed that views regarding current economic conditions improved among Floridians in July,” said Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research. He also noted they expect consumer sentiment in Florida to remain high in the coming months, continuing the economic expansion.
Small Business Pulse
The NFIB reports its Small Business Optimism Index rose 1.4 points to 104.7 in July, with seven of 10 components advancing, two falling, and one remaining unchanged. The Uncertainty Index fell 10 points, reversing a surge in June that reached the highest level since March 2017.
The NFIB found small business owners’ plans to create new jobs and make capital outlays advanced and earnings trends improved, supported by a solid improvement in sales trends; plans to order new inventories posted a solid gain; after surging last month, reports of higher average selling prices stabilized, with no evidence of a pickup in inflation; and credit conditions remain very supportive, interest rates on loans are historically low, and there are few complaints about credit availability.
“Small business owners want to grow their operations, and the only thing stopping them is finding qualified workers” says NFIB President and CEO Juanita D. Duggan.
Consumer revolving debt lost some steam in June following a U.S. credit card spring spurt wherein Americans added $14 billion over the prior two-month period. However, the spring credit card bubble mirrors consumer behavior of ten years ago, shortly before the Great Recession.
U.S. revolving credit, mostly credit card debt, edged down by 0.1% or 10 bps (basis points) in June, compared to a revised 8.4% year-on-year (YOY) gain in May and a revised 7.6% YOY increase in April. The monthly gains for April and May were the highest in more than five years.
On a quarterly basis, U.S. revolving consumer credit grew 5.3% YOY in the second-quarter (April-Jun), compared to a revised 1.5% YOY gain in the first-quarter, and compared to a revised 3.2% YOY increase for the same period one-year ago, according to the Federal Reserve report.
For April and May, Americans added $14.1 billion in consumer revolving debt (97% credit card debt), with a total increase of $18.0 billion for the first six months of 2019, according to tabulations by CardData.