Consumers Don’t Like What They See?

Imagine if almost all people over the age of 80 get the vaccine by January. That would shrink the death rate quickly and allow life to start to go back to normal. The good news in this report is the expectations index rose from 84.3 to 87.5. That’s because consumers see the vaccine going out. Since the end of this survey, Moderna’s vaccine was approved.

The net percentage claiming business conditions are good fell from -16.1% to -23.5%. Conditions weren’t good last month, but a few percent of people changed their mind and saw them worsen this month. They are probably correct. The Richmond Fed manufacturing index actually went up from 15 to 19 which beat estimates for 12 and the highest estimate for 14. The manufacturing part of the economy is definitely the most resilient at this point in the cycle.

The net percentage of consumers saying jobs were plentiful fell from 6.9% to 0.2%. That’s a perfect assessment of the labor market based on initial claims as they fell in November and started to rise in December. Some analysts are looking for negative job creation in December, following positive creation in November.

The data on expectations improved modestly. For example, the net percentage expecting business conditions to improve in the next 6 months rose from 4% to 7.1%. Consumers are too negative. Conditions are very likely to be better by June. We all wonder how much the stock market impacted their answer. It doesn’t seem to have played a big role because stocks have done so well. Obviously, the market has recently been led by the secular growth tech stocks, but they don’t know that.

Goldman Current Activity Index Goes Negative

The expansion isn’t over and this is not a double-dip recession. We are discussing this because the chart below shows the preliminary December current activity index went from 3% growth in November to -0.5% growth. The annualized growth rate is negative for the first time since April. This makes sense because there was an increase in initial claims and a weakness in consumer confidence. 

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