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Consumer Confidence Calamity Lurks Despite Dec Bump

Consumer Confidence Calamity

Consumer confidence calamity rebounded a tad in early December with the prospects of a long-delayed stimulus package being passed before the holiday break, the beginning of COVID-19 immunizations and the U.S. Supreme Court and Electoral College finally squelching voter fraud claims propagated by extremists.

However, the brief consumer confidence December bump is likely to be short-lived as the gargantuan surge in COVID deaths to 3,000 per day, following unmasked Thanksgiving revelries marches on, and likely to be further exacerbated by mask-less Americans celebrating the extended holiday break,

Also, the bungled vaccine federal distribution management, the grossly mismanaged and dismantled U.S. Postal system, the expiration or interruption of pandemic relief benefits for Americans, and the prospects of two pandemic profiteers slipping into the U.S. Senate in early January to give control to a malfunctioning, obstructionist and unempathetic party, spell bigly trouble.

Additionally, the prospects of an all-out cyber war with America’s biggest adversary and the potential eviction/disinfection of the White House in January do not bode well for consumer confidence.

Consumer Confidence Calamity Solutions

Consumer spending, representing more than two-thirds of the U.S. economy, continues to sink to the point where the number of U.S. households reporting food insecurity has risen more than 35% since the onslaught of Covid-19, notes Robert McKinley, Senior Analyst of CardWeb. Spending in bars and restaurants continues to decline, about 5% monthly, while the only meaningful increases have been reported by grocery and building supply stores.

While credit card debt on Visa, Mastercard, American Express and Discover has been declining this year, debit card usage is up remarkably reports CardData and Bankcenter. Additionally, gas and store credit cards has been increasing, and indicator credit quality is slipping.

Professor Cardworthy suggests the cancellation of all consumer credit card debt, an indefinite EBT food allowance per household, and a $1,000 monthly supplement to all Americans would immediately reverse the bleak current economic situation. Clawing back the unwarranted 2017 corporate and high personal income tax breaks will take a big bite out to the costs of these urgently needed actions. Coupled with masking, distancing and vaccine injections the Covid war could easily be won in 2021.

National Consumer Confidence

The Conference Board Consumer Confidence Index declined in November, after remaining relatively flat in the prior month. The Index now stands at 96.1, down from 101.4 in October. The percentage of consumers claiming business conditions are “good” declined from 18.6% to 17.6%, but those claiming business conditions are “bad” also decreased, from 34.4% to 33.5%. Consumers’ assessment of the labor market was unchanged. The percentage of consumers saying jobs are “plentiful” held steady at 26.7%, while those claiming jobs are “hard to get” was virtually unchanged at 19.5%.

However, Americans have grown less optimistic about the short-term outlook. The percentage of consumers expecting business conditions will improve over the next six months decreased from 36.0% to 27.4%, while those expecting business conditions will worsen increased from 15.9% to 19.8%. Consumers’ optimism regarding the job market also weakened. The proportion expecting more jobs in the months ahead declined from 32.0% to 25.9%, while those anticipating fewer jobs increased moderately from 19.8% to 20.5%. Regarding their short-term income prospects, the percentage of consumers expecting an increase was virtually unchanged at 17.6%, while the proportion expecting a decrease declined from 14.2% to 13.3%.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board. notes the resurgence of COVID-19 is further increasing uncertainty and exacerbating concerns about the outlook.

Heading into 2021, consumers do not foresee the economy, nor the labor market, gaining strength. In addition, the resurgence of COVID-19 is further increasing uncertainty and exacerbating concerns about the outlook.

National Consumer Sentiment

Consumer sentiment posted a surprising increase in early December due to a partisan shift in economic prospects. Following Biden’s election, Democrats became much more optimistic, and Republicans much more pessimistic, the opposite of the partisan shift that occurred when Trump was elected

The preliminary December Survey of Consumers, by the University of Michigan, reports its Index of Consumer Sentiment (overall) increased 5.9% from November. The Index of Current Economic Conditions also rose 5.5% from the prior month and the Index of Consumer Expectations jumped 6.0% from November 2020.

However, year-on-year (YOY) the Consumer Sentiment (overall) decreased 18.0% in December. The Index of Current Economic Conditions also rose 5.5% from the prior month and the Index of Consumer Expectations is also sharply down 16.0% from December 2019.

University of Michigan Chief Economist Richard Curtin says most of the early December gain was due to a more favorable long-term outlook for the economy, while year-ahead prospects for the economy as well as personal finances remained unchanged.

Just as four years ago, the post-election partisan shifts in economic expectations are too extreme to be justified by economic fundamentals. These divergences may persist largely unchanged in the year ahead. In the immediate future, job losses and income declines due to shutdowns are expected to increase, and the long priority queues before most consumers can be vaccinated will make the wait amid rising deaths all the more difficult to endure.

Small Business Optimism

Earnings trends among small businesses, over the past 3 months, declined 4 points to a net negative 7% reporting higher earnings quarter over quarter. Inventory investment plans for the next 3 to 6 months decreased 7 points from a 48-year record high of a net 12% in October to a net 5% in November.

The NFIB Small Business Optimism Index reports a decline of 2.6 points in November to 101.4 but remains well above the 47-year historical average reading of 98. Six of the 10 Index components declined and four increased. The NFIB Uncertainty Index decreased 8 points to 90, still a historically high reading. Owners expecting better business conditions over the next 6 months declined 19 points to a net 8%.

Finding qualified employees remains a problem for small business owners with 89% of those hiring or trying to hire reporting few or no “qualified” applicants for the positions they were trying to fill. Twenty-seven percent of owners reported few qualified applicants for their open positions and 20% reported none. Six percent of owners cited labor costs as their top business problem (down 2 points), but 24% said that labor quality was their top business problem (up 2 points), exceeding the percentages that selected taxes, regulations, and weak sales as their top problem.

NFIB Chief Economist Bill Dunkelberg notes small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election. The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.

The NFIB survey also found the frequency of reports of positive profit trends decreased 4 points to a net negative 7% reporting quarter-on-quarter profit improvement, historically a favorable reading. Among owners reporting weaker profits, 55% blamed weak sales, 8% cited usual seasonal change, 8% cited a higher cost of materials, 6% cited lower prices, and 3% cited labor costs. For owners reporting higher profits, 73% credited sales volumes, 9% cited usual seasonal change, and 8% cited higher prices.

Sources: CardData; RAM Research; CardTrak; CardFlash; Cardworthy; CardWeb; PYRPTS; CardBuzz; Bankcenter; PYVNTS; Ruebud Media; Red3 Media; Robear’s List