Consumer Sentiment Weakens In January

Finally, there was a small downtick in the year ahead inflation estimates to 4.4%. This is a low estimate for this index. Low estimates for inflation make sense because gas prices are low, food inflation has been low, and shelter inflation has moderated.

Consumer Sentiment - Is A Weak ISM Non-Manufacturing PMI Coming?

There are tracking estimates for all economic reports. This means investors have an idea of where the economy is. But they don’t know for sure until the government reports come out.

Economic data still moves markets, so I still follow it and use it. The ISM PMI is a private report, so it never stopped coming out during the government shutdown. There is also a private tracker for this report to help investors play it.

As you can see from the chart below, Goldman Sachs’ non-manufacturing tracker shows the PMI will be about 52.

That would be a major decline from the 57.6 reading in December. I am expecting that reading for the manufacturing PMI. However, the flash Markit reading differs from the regional Fed reports. Markit showed services was weak and manufacturing was strong.

We will see where the non-manufacturing PMI lands on February 5th. Obviously, it would be worse to see them both plummet to the low 50s than one falling. The bulls would rather see manufacturing weakness as it can be explained away by blaming the global economic slowdown.

A 52 non-manufacturing PMI would take down estimates for Q1 GDP growth.

(Click on image to enlarge)

Consumer Sentiment - Conclusion

This article included a lot of negative data. Consumer confidence fell, and weekly Redbook same store sales growth decelerated. Also, the Goldman Sachs tracker for the January non-manufacturing PMI implies growth slowed sharply.

The good news is, plans to buy a house increased despite the weakness in consumer sentiment. If the housing sector rebounds, it will be a major boon for the Q1 GDP report. I’m curious to see when the Q4 GDP report will come out.

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