Consumers Don’t Like What They See?

Redbook Sales Growth Bumps Up

Redbook spending growth in the week of December 19th rose from 2.5% to 6.5%. That’s actually a good reading. It had been in the low single digits for a while. If it can stay in the mid-single digits, it will be a positive sign. As for now, it’s just 1 week of data which is meaningless. The stimulus had no effect on spending in that week because it wasn’t signed by then. The money still hasn’t gone out. It would only help spending this week if people borrow in anticipation of the money coming.

That’s not how people act though. They are usually conservative with money from the government because they don’t know when the next check is coming. It’s not like a job where people know they will get paid because they did work. One thing to keep in mind, which we don’t know is a factor here, is that people need to buy gifts online in advance of when they can buy them in stores. 

Usually, if you want to get a last-minute gift, you can literally wait until the last minute. With online shopping, you need to allow for shipping, so the peak in spending should be around now. Sure, some offer 1-day shipping, but that’s not universal. It would be bad if that’s why Redbook sales growth increased since that’s not sustainable.

Consumer Confidence Falls

Consumer confidence plummeted in December similar to consumer sentiment and most of the other data on the consumer like Chase card spending. The Redbook result is one of the few positives, but it’s the most updated, so it’s worth following. 

The consumer confidence index’s cutoff date is December 14th. The consumer confidence index fell from 92.9 to 88.6 as you can see from the chart below. It fell near its cycle lows because of the present conditions index. This suggests consumer spending this holiday shopping season was weak.

Present conditions were crushed from 105.9 to 90.3. Consumers were staring at the spike in COVID-19 cases and not seeing any sign of a stimulus being signed. That will change in January as the stimulus passed. If we are lucky, the recent peak in COVID-19 cases will be maintained and lead to a decline in hospitalizations. There is a chance if all the vaccines go to the elderly, which they will, there will immediately be a sharp decline in deaths. 

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