Is the U.S. consumer OK? Fed chief Powell will soon be the latest to weigh in
Is the American consumer still all right? Several signals this week are flashing yellow, upping the ante as investors' attention turns to the Federal Reserve meeting on Wednesday. First, on Tuesday, retail spending in May showed a 0.9% decrease versus April, which itself was revised lower to indicate a 0.1% monthly decline, down from the 0.1% increase reported previously. The primary contributor to the decline was a 3.5% monthly decrease in sales at motor vehicle and parts dealers. Recall, a 25% tariff on vehicles not assembled in the U.S. went into effect on April 3, which, according to S & P Global Mobility, made up 46% of domestic sales in 2024. Another less direct signal of the weakening demand was Amazon's announcement Tuesday that its July Prime Day event has been extended to 96 hours this year, up from two days last year. The extended timeframe may simply be a move to try out a new sales feature called "Today's Big Deals" from big brands like Samsung, Kiehl's and Levi's. But we tend to believe that the extension of a well-established sale is an attempt to gin up demand. The University of Michigan's consumer sentiment index for the U.S. rebounded to 60.5 in June, up from the 52.2 in April and May, but it's still well off the recent high we saw in December (74) or even the level seen in February (64.7) when President Donald Trump's tariff talk started to ramp up. And while it's too soon to measure the impact of the Israel-Iran conflict or the possibility of direct U.S. involvement, we assume the uncertainty is a net negative on consumer spending. That's even more true as energy prices, which represent a largely unavoidable cost for consumers that competes with discretionary spending, start to creep up as investors price in a "geopolitical premium," reflecting the implications of a supply shock should Iran's contribution to global supply start to wane. All of this adds even more importance to the Fed meeting later Wednesday, even as the market is widely expecting the central bank to keep rates unchanged in the range of 4.25% to 4.5%. It's more about where rates may go later this year. To that end, investors will be closely listening to Fed Chair Jerome Powell's press conference Wednesday to better understand how the central bank is thinking about the potential of weakening consumer demand at the same time energy prices have started to rise. That is a key factor when it comes to inflation given that energy costs ripple through every aspect of the global economy. The Fed needs to balance price stability and full employment, and right now it's facing risks on both sides of its dual mandate. The central bank's latest economic projections, released only quarterly, also are due out Wednesday and carry the potential to move markets. To be sure, consumer demand remains pretty strong on the whole. As noted, retail sales were heavily weighed down by vehicle sales, which represent large, often-financed purchases that were also hit with sizable tariffs. Other categories saw monthly gains. In addition, there have been positive updates in the restaurant sector, with both foot traffic and sales picking up, according to UBS. If anything, the consumer is becoming more budget-conscious and hungry for deals, but still spending. As long as the labor market holds in there , that may continue to be the case. We will continue to monitor for signs of further weakening from the consumer, which will in turn give us insight into the economic backdrop more broadly. Remember, private consumption accounts for roughly two-thirds of U.S. GDP. At the moment, our retail names are well positioned whether consumer confidence bounces back like we hope, or should it deteriorate further. Amazon is clearly ready to lean into promotional activity in order to keep the consumer shopping with them and has the scale to force merchants to play along. Costco also has the scale to keep prices low and buy selling in bulk can offer consumers prices they can't find anywhere else on daily essentials. Meanwhile, TJX Companies can still draw in consumers thanks to the best-in-class value it offers and stands to benefit from consumer push back on full-priced retailers by scooping up any quality unsold inventory. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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Business Insider
25 minutes ago
- Business Insider
LA's immigrant street vendors fear ICE raids but are still slinging tacos
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Sughey and her co-workers have continued to sell food despite the risk of being undocumented because their families depend on the paychecks. "This is our only job, this is how we get to survive," Sughey said. She asked that the business not be named out of fear that it could be targeted by federal law enforcement. Two other vendors I spoke to said they had work authorization in the US but aren't citizens. They feared being swept up in what they see as indiscriminate arrests targeting Latino workers. "If you are present in the United States illegally, you will be deported," Abigail Jackson, a spokesperson for the White House, wrote in an email to Business Insider. "This is the promise President Trump made to the American people that the administration is committed to keeping it." The White House and ICE did not confirm with Business Insider the number of people detained or whether warrants had been issued in all instances. All the street vendors I spoke to said they've lost money, estimating that business has dropped by 75% because customers were avoiding ICE raids and the protests. The city hadn't announced the 8 p.m. curfew yet, but with all the ruckus, Sughey's taco stand would be closing that evening before 9 p.m. instead of the usual 2 a.m. At the time, she was hopeful that the raids and protests would die down. "Hopefully, this is just for a little bit and then it goes away," she said. A week later, the curfew in downtown had ended, but a sense of unease still lingers in the atypically quiet district. Business is slow, tensions are high, and vendors' families need the paychecks Less than 5 miles away, another immigrant neighborhood had slowed down as well. Benny Moreno, 52, operates El Patrón, a family-owned business that makes Mexican favorites like tacos, tortas, sopes, and burritos in Koreatown. 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Denise was ordering steak fries and tacos for her family, including her parents, who are undocumented and have been too afraid to leave the house. Denise, whose mom emigrated from Vera Cruz, Mexico, like Moreno, came out to support his business. Members of Moreno's indigenous Zapotec community were detained during ICE sweeps in the fashion district the previous Friday, Denise said. "We were just getting back up from COVID," Denise said of the street vendors. "It feels like we're getting shut down all over again. It's very hard." The slowdown is hurting Moreno's bottom line. He said he pays around $2,000 a month to rent his truck and maintain a permit to park on the streets. "I'm worried because my bill is too high," Moreno said, adding that he has no choice but to continue his late-night operation from 7 p.m. to 2 a.m. to support his wife and two kids. "I'm working hard to support my family to pay my bills and my rent." Claudia Antonio and Abel Pacheco are in a similar position. 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Work authorization is not enough for immigrant vendors to feel secure Antonio and Moreno both said they have work authorization to operate their food businesses, but since they aren't citizens, they've been feeling more anxious than ever. Publications including the Los Angeles Times and LA Taco have published videos showing street vendors and their employees detained by federal officers. ICE officials have been tracking down non-citizens who pay taxes at their places of business and home addresses using records from the Internal Revenue Service, according to reporting in the New York Times. "I'm worried," said Moreno. "ICE, they take people, even if they're citizens, they do not even ask for the papers. They just take people." A viral video of a US citizen being detained, published by The New York Times, stoked outrage that ICE may be racially profiling Latinos. Antonio and Pacheco are also applying for adjustment of status to become lawful permanent residents with green cards. 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The Hill
28 minutes ago
- The Hill
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