Consumer Health Diagnosis "Grim" As Four Out Of Five Spending Indicators Disappoint

Following up on Friday's abysmal consumer income data, we now take look at the spending side of the equation, without much optimism. Not surprisingly, as Bloomberg's Richard Yamarone summarizes, the consumer health picture in January was "grim" and "after adjusting for inflation and taxes, is simply insufficient to sustain the expansion." He adds that "over the last couple of weeks, no fewer than a dozen consumer-related companies made mention of the deterioration in incomes as a risk to  business and performances." Yamarone concludes: "Spending on discretionary items has softened in recent months. Four of our ‘Fab Five’ spending barometers fell or were unchanged in January from December. Comments from the Bloomberg Orange Book suggest further deterioration ahead." That this is happening with rates at zero, and with an effective countrywide mortgage payment moratorium allowing millions to live mortgage payment free, means that if and when things normalize, consumption - the driver of 70% of the US economy - will fall off the proverbial cliff.

From Bloomberg Brief:

In recent weeks C-suite executives in the Bloomberg Orange Book have increasingly cited real disposable personal incomes as a concern. In fact, over the last couple of weeks, no fewer than a dozen consumerrelated companies made mention of the deterioration in incomes as a risk to business and performances.

 

Spending on discretionary items has softened in recent months. Four of our ‘Fab Five’ spending barometers fell or were unchanged in January from December. Comments from the Bloomberg Orange Book suggest further deterioration ahead.

 

Casino spending fell 1.6 percent in January. Caesar’s Entertainment CEO Gary Loveman said that his company’s performance was executed “against the backdrop of ongoing uncertainty in the macroeconomic picture in this country and consumer weakness in the U.S. economy that negatively affected discretionary consumer spending and ultimately our gaming results.”

 

While spending on cosmetics inched up 0.6 percent in January, the forwardlooking commentary wasn’t encouraging. Elizabeth Arden CEO Scott Beattie said the consumer continues to face challenges. “These are customers that are living paycheck to paycheck, many of them reliant on government subsidy in food stamps and unemployment insurance and other kinds of government subsidies.”

 

Jewelry and watch spending was unchanged in January, and dining out registered a 0.1 percent decline.

 

Weakness in dress sales were mentioned by bebe stores inc., which supported the 1.1 percent monthly decline in spending at women’s and girls’ clothing.

 

As long as this mindset continues – which is largely a function of dwindling available incomes – spending will remain depressed and the economic recovery weak at best.

But as long as the depression remains strong...