Relying on US consumption for GDP instead of actual growth isn't panning out

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9/13/13, "Consumer Confidence Collapses - Biggest Miss On Record," Zero Hedge

"This is the first consecutive monthly drop in 14 months and the largest miss vs expectations on record. Printing at 76.8 (against an expectation of 82.0), this is the lowest in 5 months and points to the picture we have been painting of a consumer increasingly affected by rising rates and soaring gas prices amid stagnant incomes."...

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9/13/13, "CEOs Confess: Consumption, That 70% Component Of US GDP, Just Isn't There," Zero Hedge

"Following this morning's miss on retail sales and plunge in consumer confidence, Bloomberg's Rich Yamarone points out that retailers remain anxious about the outlook as they see consumers cautious and expect a spending slowdown. The following quotes from some of the largest and most bellwether names may help shed some light on the reality of the hope that is priced into markets about consumption relative to actual business expectations... perhaps best summed by Sealed Air's CEO, "we are in the fourth year of the recovery and it doesn’t feel like a recovery. Because it’s the first time ever that things, four years within a recovery, are feeling so iffy."

CVS [CVS] Earnings Call 8/6/13: “We are continuing to see a cautious consumer. I think as you look across some of the external data available in the second quarter, whether it’s IMS or some of the other data, it did show some consumer spending slowdown in the quarter.”

Church & Dwight [CHD] Earnings Call 8/2/13: “I’ve been a long-term pessimist about the business environment. The latest forecast of weak GDP growth, continuing high unemployment and weak same-store sales by major retailers provide little hope for significant near-term improvement in the U.S. economy. In fact, of the 14 categories that Church & Dwight operates in, five incurred lower category dollar sales in the second quarter versus the prior year, and five more had category growth of less than 2 percent versus the prior year. Now all consumer packages companies are fighting these headwinds.”

Brinker International [EAT] Earnings Call 8/2/13: “This quarter we continued to see a fairly lethargic category and some of the macroeconomic elements aren’t quite as good as we hoped they’d be at this point in time. While we remain optimistic that the back half of the calendar year will contain improvements in key metrics like consumer confidence and employment, the restaurant industry isn’t recovering as fast as we had hoped
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Sealed Air Corp. [SEE] Earnings Call 8/2/13: “This economy is not strong. I was listening to NPR this morning in the car coming to the office and somebody was making the comment, saying that we are in the fourth year of the recovery and it doesn’t feel like a recovery. Because it’s the first time ever that things, four years within a recovery, are feeling so iffy.”"

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9/13/13, "U.S. retail sales, consumer confidence point to soft economy," Reuters, by Lucia Mutikani

"Retail sales rise 0.2 percent in August, below forecast * Consumer confidence falls in early September * Producer prices up 0.3 percent on energy, but core flat"

"U.S. consumer confidence ebbed early this month and retail sales advanced just slightly in August, the latest indications of a lack of momentum in the economy. The sluggish pace of activity was underscored by another report on Friday showing an energy-led rise in wholesale prices last month, but subdued underlying inflation pressures.  

The soft data, however, was unlikely to deter the Federal Reserve from cutting its massive bond-buying program as early as next week, analysts said. "I don't think that's a red flag for the Fed. Overall the data picture is mixed and supports our view that it will be a light taper," said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

The Thomson Reuters/University of Michigan's index of consumer sentiment fell 5.3 points to 76.8 in early September, the lowest since April. Economists pointed to worries over high interest rates and a possible U.S. military strike on Syria. Borrowing costs have risen sharply in recent months in anticipation of the Fed scaling back its monthly bond purchases.

A separate report from the Commerce Department showed retail sales rose 0.2 percent last month as Americans bought automobiles and other long-lasting goods like furniture and electronics and appliances.

But those purchases appeared to draw spending power away from other areas and receipts for clothing, building materials and sporting goods all fell. 

Clothing store receipts dropped by the most in nearly 1-1/2 years, reflecting a slow start to back-to-school sales and offering a cautionary note ahead of the holiday shopping season.

Nevertheless, it was the fifth straight monthly rise in retail sales, which account for about 30 percent of consumer spending. They had gained 0.4 percent in July and economists polled had expected them to rise 0.4 percent last month.

Stripping out automobiles, gasoline and building materials, so-called core sales were up 0.2 percent after rising 0.5 percent in July. Core sales correspond most closely with the consumer spending component of gross domestic product. Though core sales slowed a bit from July, they matched the second quarter's 0.2 percent average monthly gain. Avery Shenfeld, an economist at CIBC World Markets in Toronto, said it appeared consumer spending was running close to the 1.8 percent annual rate it logged in the second quarter."...


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