Consumer Sentiment Weakens In January

Consumer Sentiment - Redbook Growth Falls Sharply

Year over year same-store sales growth in the Redbook weekly report declined in the week of January 26th from 7% to 5.8%.

We are now back to the doldrums of early January where growth was decelerating sharply. This is perfectly in line with the consumer sentiment report I will review in the next section of this article.

Month to date sales from the prior month are down 1.8% which is the weakest reading in a year. To be clear, these results are seasonally adjusted, so it’s possible to compare January to December.

That being said, I wouldn’t be surprised if there was some funny business with that comparison. Either way, this data showed there was a spending growth slowdown because the full month year over year gain fell 0.3% to 6.5%. Growth was 9% at year-end.

This report wasn’t a disaster. But slowing growth confirms the economic uncertainty caused by the trade war, government shutdown, and volatility in the stock market hurt spending.

It’s interesting that as stocks were very low at the end of last year, Redbook same-store sales growth was near its record high. Now growth has slowed, but stocks have rallied.

Consumer Sentiment - Did Consumer Confidence Peak?

Consumer confidence as measured by the Conference Board slipped in January. The worst case scenario for any index in the rate of change terms is for it to come off of cycle highs.

That’s what has happened to consumer confidence as the index fell to 120 in January which missed estimates for 124.3. December’s reading was revised from 128.1 to 126.6.

As you can see from the chart below, since November, the index is down 16.2 points which is its sharpest decline since the 2008 recession.

(Click on image to enlarge)

The expectations index fell 10.4 points to 87.4 which is the lowest reading in 3 years. Usually, when the expectations index falls more than the current situation index, it’s a signal the business cycle is turning.

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