Latest news with #ElizabethRenter
Yahoo
4 hours ago
- Business
- Yahoo
Bad ‘vibes' may be having a bigger impact on the economy now
There has been a disconnect in recent years between the so-called soft economic data and the hard data as weak readings on consumer confidence didn't always translate to lower payrolls or GDP. But that may be changing as key buffers that propped up spending are disappearing, according to NerdWallet senior economist Elizabeth Renter. Americans used to say one thing about their feelings on the economy and do something else with their actual dollars. But that may be changing. The disconnect between weak readings on consumer confidence versus solid employment, income and GDP data was previously described as a 'vibecession' by economist Kyla Scanlon, who first used the term in her 2022 Substack post. The last vibecession hit as inflation was at the highest levels in more than 40 years, while an aggressive rate-hiking campaign from the Federal Reserve spiked borrowing costs, making auto loans and mortgages more expensive. But consumers continued to spend as the labor market remained robust. And aside from a brief dip in GDP, the economy avoided a recession. Confidence surveys also increasingly reflected partisan differences more than the actual economy. Fast forward to 2025. Consumer sentiment collapsed after President Donald Trump launched his trade war, and GDP shrank again, skewed by a rush to buy imported goods ahead of higher tariffs. Still, payrolls have held up, and inflation hasn't been as affected by tariffs as feared. But while sentiment recovered a bit after Trump postponed his highest tariff rates, it's still 20% below December 2024 levels. 'Despite this month's notable improvement, consumers remain guarded and concerned about the trajectory of the economy,' the most recent University of Michigan survey said. At the same time, the Trump administration is slashing spending and jobs, with ripple effects reaching contractors and even certain real estate markets. Businesses that are uncertain about the economy and the direction of tariffs have slowed hiring. Student-loan delinquencies are up, and AI is eliminating many entry-level jobs that once went to newly minted college graduates. Then there's oil prices, which have jumped since Israel launched airstrikes on Iran. The cumulative effect is taking a toll. 'I don't think the U.S. consumer has grown numb or blind to the headlines and economic risk—over the past month we've seen some sentiment scores rise slightly, but we have to think about where they were rising from,' Elizabeth Renter, senior economist at NerdWallet, said in a note on Friday. 'A little bit better doesn't necessarily mean good, even if it might mean hopeful.' As a result, it's getting harder to dismiss the so-called soft data on the economy and focus instead on the hard data. That's as Fed Chairman Jerome Powell has said he and his fellow policymakers won't act on rates until the hard data on unemployment and inflation gives them a clear reason to. But the soft stuff may be leaking into the hard stuff. 'Unlike a few years ago, the 'vibes' now stand to have a greater impact on behavior, and thus the health of the economy,' Renter wrote. 'That's because unlike a few years ago, people don't have the luxury of easily stumbling into a better job or relying on excess savings and debt payment forbearances.' In fact, household debt is rebounding to pre-pandemic levels and beyond, eroding the ability to absorb an unexpected expense or job loss, she added. Bill Adams, chief economist at Comerica Bank, similarly drew a direct line between consumer sentiment and actual spending. Digging into the May retail sales report, he noted that consumers didn't just pull back on durable goods like electronics and cars, which fell after an earlier jump to get ahead of tariffs, they also reined in spending on daily expenses like groceries and restaurants. Spending at building material and garden supply stores also saw big drops, suggesting less residential investment in home improvements. 'With declines visible in unrelated categories, it looks like weak consumer confidence was to blame for the pullback in consumer spending last month,' Adams wrote. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
8 hours ago
- Business
- Yahoo
Bad ‘vibes' may be having a bigger impact on the economy now
There has been a disconnect in recent years between the so-called soft economic data and the hard data as weak readings on consumer confidence didn't always translate to lower payrolls or GDP. But that may be changing as key buffers that propped up spending are disappearing, according to NerdWallet senior economist Elizabeth Renter. Americans used to say one thing about their feelings on the economy and do something else with their actual dollars. But that may be changing. The disconnect between weak readings on consumer confidence versus solid employment, income and GDP data was previously described as a 'vibecession' by economist Kyla Scanlon, who first used the term in her 2022 Substack post. The last vibecession hit as inflation was at the highest levels in more than 40 years, while an aggressive rate-hiking campaign from the Federal Reserve spiked borrowing costs, making auto loans and mortgages more expensive. But consumers continued to spend as the labor market remained robust. And aside from a brief dip in GDP, the economy avoided a recession. Confidence surveys also increasingly reflected partisan differences more than the actual economy. Fast forward to 2025. Consumer sentiment collapsed after President Donald Trump launched his trade war, and GDP shrank again, skewed by a rush to buy imported goods ahead of higher tariffs. Still, payrolls have held up, and inflation hasn't been as affected by tariffs as feared. But while sentiment recovered a bit after Trump postponed his highest tariff rates, it's still 20% below December 2024 levels. 'Despite this month's notable improvement, consumers remain guarded and concerned about the trajectory of the economy,' the most recent University of Michigan survey said. At the same time, the Trump administration is slashing spending and jobs, with ripple effects reaching contractors and even certain real estate markets. Businesses that are uncertain about the economy and the direction of tariffs have slowed hiring. Student-loan delinquencies are up, and AI is eliminating many entry-level jobs that once went to newly minted college graduates. Then there's oil prices, which have jumped since Israel launched airstrikes on Iran. The cumulative effect is taking a toll. 'I don't think the U.S. consumer has grown numb or blind to the headlines and economic risk—over the past month we've seen some sentiment scores rise slightly, but we have to think about where they were rising from,' Elizabeth Renter, senior economist at NerdWallet, said in a note on Friday. 'A little bit better doesn't necessarily mean good, even if it might mean hopeful.' As a result, it's getting harder to dismiss the so-called soft data on the economy and focus instead on the hard data. That's as Fed Chairman Jerome Powell has said he and his fellow policymakers won't act on rates until the hard data on unemployment and inflation gives them a clear reason to. But the soft stuff may be leaking into the hard stuff. 'Unlike a few years ago, the 'vibes' now stand to have a greater impact on behavior, and thus the health of the economy,' Renter wrote. 'That's because unlike a few years ago, people don't have the luxury of easily stumbling into a better job or relying on excess savings and debt payment forbearances.' In fact, household debt is rebounding to pre-pandemic levels and beyond, eroding the ability to absorb an unexpected expense or job loss, she added. Bill Adams, chief economist at Comerica Bank, similarly drew a direct line between consumer sentiment and actual spending. Digging into the May retail sales report, he noted that consumers didn't just pull back on durable goods like electronics and cars, which fell after an earlier jump to get ahead of tariffs, they also reined in spending on daily expenses like groceries and restaurants. Spending at building material and garden supply stores also saw big drops, suggesting less residential investment in home improvements. 'With declines visible in unrelated categories, it looks like weak consumer confidence was to blame for the pullback in consumer spending last month,' Adams wrote. This story was originally featured on
Axios
03-03-2025
- Business
- Axios
The economy's January air pocket
The good news about the U.S. economy in January is that inflation was subdued and Americans were making more money. The bad news is that people weren't interested in spending it. Why it matters: The latest data on the state of the economy as President Trump took office is further evidence that there was something of an air pocket in spending and confidence to start the year. It's a warning about consumers' wariness as the administration undertakes an aggressive economic agenda. The intrigue: The Atlanta Fed's GDPNow, an estimate of GDP growth based on incoming data, fell to negative 1.5% for Q1 after incorporating Friday morning's releases. That includes preliminary trade data showing a record surge of goods imported into the U.S. — a sign of businesses bringing things in early to get ahead of the administration's tariff threats. Rising imports are a drag on GDP. Before Friday's data, GDPNow was comfortably in positive territory, at +2.3%. What they're saying: "The data indicates that consumers were saving more in January, which aligns with the rise in economic pessimism we've seen in recent sentiment data," NerdWallet senior economist Elizabeth Renter wrote in a note. "People are feeling uncertain about the near-future economy, and are spending a bit more cautiously," Renter added. By the numbers: The Consumer Price Index released earlier this month indicated the inflation last month was hotter than expected. The Personal Consumption Expenditures Price Index — the inflation measure preferred by the Federal Reserve — was more encouraging, as economists expected. In the year through January, the PCE increased 2.5% — cooling for the first time since September. Core PCE, which excludes energy and food costs, rose 2.6%, the slowest pace since 2021. On a three-month annualized basis, core PCE held at 2.4%, still higher than the Fed's 2% target. Between the lines: Personal income sped ahead of inflation in January, increasing 0.9% (or 0.6%, adjusted for inflation). That surge was primarily led by the cost-of-living adjustment for Social Security benefits, along with healthy compensation growth and a boost from interest and dividend payouts. Meanwhile, consumption expenditures fell 0.2%, the first decline in monthly spending since March 2023. That resulted in a sharp rise in the savings rate, which increased to 4.6% from 3.5% in December. Yes, but: Consumer spending is the bedrock of the economy, and one month of data doesn't mean the cracks are here to stay. Isolated events, like the cold front and the Los Angeles wildfires, likely dented spending. "The recent slump in consumer confidence suggests some of January's drop in spending was due to fears of the impact of tariffs, [Department of Government Efficiency] cuts and deportations," Comerica chief economist Bill Adams wrote in a client note. "But winter weather also likely delayed a lot of nonessential spending, which should rebound in February with less disruptive weather. January's robust increase in incomes also suggests spending growth should recover near-term."
Yahoo
28-02-2025
- Business
- Yahoo
Fed inflation gauge indicates big changes in key economic driver
The Federal Reserve's preferred inflation gauge eased modestly last month, data indicated Friday, but personal spending figures showed one of the biggest pullbacks in three years, suggesting further weakness in the world's biggest economy. The Bureau of Economic Analysis's PCE Price Index report for the month of January showed core prices rising at an annual rate of 2.6%, down from the December reading of 2.9% and matching Wall Street's consensus forecast. Core price pressures, which strip away volatile food and energy components, were up 0.3% on the month, compared with December's 0.2% increase and matching Wall Street's consensus estimate of 0.3%. Markets focus on the core PCE inflation reading, which the Fed considers a more accurate representation of overall price pressures as it incorporates changes in consumer-spending patterns. The BEA's headline PCE inflation index quickened to an annual rate of 2.5%, matching Wall Street's estimate and slightly below the 2.6% pace recorded in December. The BEA said prices rose 0.3% on the month, following a 0.3% reading in December. The BEA also noted that personal incomes for January rose 0.9%, more than double Wall Street's estimate and the 0.3% forecast, while spending slumped 0.2% compared with the 0.7% advance in the prior month. A slowdown in consumer spending, which was also evident in the Commerce Department's January reading of retail sales, is crucial for an economy that relies on the services sector for around two-thirds of its growth. "As the PCE index shows inflation moderation and as the labor market continues on solid-footing, we can expect the Fed to stay the course, holding rates in place for the near future," said Elizabeth Renter, senior economist at NerdWallet. "Yes, there are risks to inflation and the labor market on the horizon, but without certainty in whether or how those will play out, they see staying the course as likely the safest bet." "The data also indicates that consumers were saving more in January, which aligns with the rise in economic pessimism we've seen in recent sentiment figures," she added. "People are feeling uncertain about the near-future economy, and are spending a bit more cautiously." U.S. stocks were little changed following the data release, with futures indicating a 20-point opening bell gain for the S&P 500 and a 235-point advance for the Dow Jones Industrial Average. The tech-focused Nasdaq is called 30 points higher. Benchmark 10-year-note yields were 2 basis points higher at 4.275% following the data release, while 2-year notes rose 2 basis points to 4.069%.The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.05% higher at 107.276. Earlier this month, the Commerce Department's January CPI inflation report showed a headline reading of 3%, with core pressures quickening to 3.3% and pegged at the highest rate since May. Since then consumer and market-based inflation expectations have moved notably higher in advance of the impact of the Trump administration's planned tariffs on goods from Canada and Mexico and increased levies on imports from China. More Economic Analysis: Retail sales tumble in January, testing Fed rate cut forecast CPI inflation shock hammers Fed rate cut bets for 2025 Rate cuts and tariffs will weigh on economic reports "Concerns of an economic slowdown brought on by potential tariffs, stickier inflation, and the possibility of higher-for-longer interest rates, coupled with a meaningful pullback in the technology sector, namely AI-related stocks, has dented sentiment in recent weeks," said George Smith, portfolio strategist at LPL Financial. Bets on a Fed response, meanwhile, are starting to develop, with CME Group's FedWatch tool now pricing in two quarter-point rate cuts for the year, one in June and the other in in to access your portfolio
NBC News
13-02-2025
- Business
- NBC News
Producer prices report points to softer Fed inflation measure than feared
A gauge of wholesale prices rose more than expected in January, though some details of the report indicated that pipeline inflation pressures are easing. The producer price index, which measures what producers get for their goods and services, increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%, the Bureau of Labor Statistics reported Thursday. Excluding food and energy, the core PPI was up 0.3%, in line with the forecast. Stock market futures moved higher following the release while Treasury yields were sharply lower, despite the higher-than-expected headline number. Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture. In particular, some costs related to health care showed easing — physician care, for instance, fell 0.5%. Also, domestic airfares declined by 0.3% and brokerage services prices were off 2.2%. Over the past year, the all-items PPI increased 3.5%, well ahead of the central bank's objective. Futures pricing indicates the market now does not expect the Fed to lower its benchmark interest rate again until October. While the producer and consumer price index releases are widely cited inflation gauges, they are not the principal ones the Fed uses. Rather, the central bank focuses on the personal consumption expenditures prices index, which the Commerce Department will release later in February. The PPI and CPI releases do feed into that measure. Fed Chair Jerome Powell on Wednesday noted the Fed's greater focus on the PCE measure, while telling the House Financial Services Committee that 'we're not quite there yet' on inflation though he cited 'great progress' made so far. Putting the data together, the core PCE measure likely will show a 0.22% increase, down from 0.45% in December, according to Citigroup estimates. That would push the annual inflation rate down to 2.5%, the firm said. The PPI release comes the day after the BLS reported that the consumer price index rose 0.5% on the month, putting the annual inflation rate at 3% and well out of reach of the Fed's 2% long-run goal. Together, the reports are pushing back expectations for a rate cut until the second half of the year, though inflation data can be volatile and the outlook could change depending on what subsequent months show. 'Wholesale price growth came in slightly higher than expected for January, and the read for December was adjusted upward,' said Elizabeth Renter, senior economist at personal finance site NerdWallet. 'In other words, inflation at the producer level remains high, and one concern is that this inflation could ultimately be passed along to consumers.' Revisions to the December numbers also complicated the inflation picture, with the gain now put at 0.5%, compared with the 0.2% increase previously reported. In January, producer prices for services increased 0.3% while goods rose 0.6%. Services prices were led by a 5.7% jump in the traveler accommodation services category, which the BLS said accounted for more than one-third of the gain. On the goods side, a 10.4% surge in diesel fuel costs was a significant factor. The PPI data also reflected the massive jump in egg prices as farmers destroy millions of chickens to prevent the spread of avian flu. Eggs for fresh use exploded 44% higher on the month and were up 186.4% from a year ago. initial filings for unemployment claims changed little for the week ended Feb. 8. Claims totaled 213,000, a decrease of 7,000 from the prior period and close to the 215,000 estimate. Continuing claims, which run a week behind, fell to 1.85 million, down 36,000.
