The almighty (and confusing) US consumer.
US economic health is intricately tied to consumer behaviour with personal consumption accounting for ~70% of GDP. Predicting whether or not Americans will keep opening their wallets for a new car, a night at a restaurant or a nice vacation has far reaching implications. The two most important surveys which attempt to do this are pointing to extremely different futures and the gap between them is near all-time highs.
If you look at the University of Michigan survey, you might expect a recession soon – indeed, it is at its lowest point in 10 years. On the other hand, if you look at the Conference Board survey, the future looks relatively rosy (although not as good as prior to the March 2020 crisis).
For the moment, it looks as though the Conference Board measure better reflects retail spending, which continues to be high. Any pull-back in that measure might start to make us think twice about the health of the US consumer and the future of economic growth.
Inflation is always and everywhere a monetary phenomenon. Although we at Kieger are by no means committed monetarists, this chart lends more credence to the idea that inflation will be moving lower in the next months.
The huge withdrawal of central bank liquidity happening currently is truly “unprecedented” (an otherwise-overused term currently). Despite all of the detailed analysis on the effects of quantitative tightening no one can predict the full impact this will have, but it is certainly not Fed Chair Yellen’s 2017 expectation of “watching paint dry”.
Inflation continues to drive recession worries. US inflation continues to drive recession worries with CPI running at 8.6% YoY in May.