May saw a modest backslide in Consumer Confidence across the name brand series (table below) as expectations ebbed on the other side of the latest stimulus check and the prospect for higher prices.
Confidence remains notoriously finicky, particularly across an increasingly attention deficited, hyper-whimsical meme-immersed populous base, so any month in isolation needs to be taken with some salt grains.
For example, consumer’s are certainly “seeing” and appropriately internalizing inflation in all its manifestations. Indeed, the surge in Inflation Expectations was the defining feature in the UMich May data … but the last time we saw anything similar (large-scale spike in Inflation Expectations last year) was promptly followed by 8-months of declines.
And the fact that consumers have moderately downgraded their forward outlook does not mean the Services Consumption juggernaut that is already in motion will somehow slam into reverse and not play out over the coming months. It will.
I could trot out any number of other indicators that households are set to spend and that any Sentiment Survey based lip service to the notion that current and future conditions are deteriorating requires employing a kind of “watch what I do, not what I say” filter.
Here's what I suggest:
Below is our inflation compendium. It’s a heat map version of pretty much every fundamental, market-based and survey-based measure of inflation and inflation expectations.
Bright Red = 0th percentile over last 5 years, Bright Green = 100th percentile over last 5 years. The bright red cluster is Covid. The emerging bright green cluster is the comp’ing of that deflationary supernova.
One sometimes useful way to contextualize something is to think about it not happening.
In other words, imagine if growth and inflation were not accelerating and/or at superficially extreme levels following the largest negative macro shock in modernity. That would probably be more of a problem for a domestic, DM and global economy flirting with stagnation and fighting disinflationary trends for the last couple decades.
In other, other words, let’s wait until maybe June/July are fully populated in the table below and then see where sentiment is trending. See what they do for a while longer, then see what they say.
Have a great weekend.
