The Economy Takes A Dive In December

Redbook same store sales growth rose from 2.5% to 6.5% in the week of December 19th. It had been in the low single digits for a while. Any sort of improvement goes against the data we have reviewed which has been weak. However, Redbook always has the most up to date information, so it’s possible the week before Christmas showed improvement. We will get a boost from the stimulus, but that’s after the holiday. Buckle up for what should be a bad retail sales report.

In line with our summary of the consumer data this holiday shopping season, the Conference Board Consumer Confidence index fell because the present conditions index tanked. As you can see from the chart below, the overall index fell from 92.9 to 88.6. That’s near the cycle low which is quite bad when you consider the economy was in a recession and many were calling for a depression in March and April. We expected this weakness though because the virus has spread and actually killed more people per day this month. Furthermore, by the end of this survey period which was December 14th, consumers didn’t know if a stimulus would pass. Now that one is coming, look for more optimism in January.

The present conditions index fell from 105.9 to 90.3. The good news 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 of consumers claiming business conditions are good fell from -16.1% to -23.5%. Based on the decline in the high-frequency data shown in the chart below, they are probably right. The December 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 the most resilient at this point in the cycle. 

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