Catching up on delayed data on inflation and retail sales, plus consumer confidence and the K-shaped economy.
Do you remember the scene in “A Charlie Brown Thanksgiving” when Marcie tells Charlie Brown: “Thanksgiving is more than eating, Chuck. We should just be thankful for being together”? I am banking on that sentiment this Thanksgiving, as I am woefully unprepared for the guests I plan to serve in the next 24 hours. But I am looking forward to it nonetheless, and hope you are too.
Before we take some time off from economic news and market moves to enjoy food, family and friends, it is worth noting that this shortened week has brought a deluge of economic data playing catch-up from the government shutdown. Among the most prominent was a report on consumer confidence from the Conference Board that sagged to a seven-month low in November, with fewer consumers planning to buy motor vehicles, houses and other big-ticket items, and booking fewer vacations over the next six months.
September retail sales, released in arrears following the government shutdown, rose only 0.2% from August to September, and are now growing at only a 4.3% pace year-over-year after rising 5.0% in August. Most of the increase was related to higher prices paid or reflected spending on higher-price point items by high-income households.
Reports like these have caused a resurgence of the notion of a K-shaped economy, described most recently by Federal Reserve Chairman Jay Powell, who said: “If you listen to the earnings calls or reports of big, public, consumer-facing companies, many, many of them are saying that there’s a bifurcated economy out there and that consumers at the lower end are struggling and buying less and shifting to lower cost products, but that at the top, people are spending at the higher income and wealth.”
Peter Atwater, the economist who popularized the idea of a K-shaped economy in the pandemic era of 2020, said he feels “like our economy today resembles a top-heavy Jenga tower… and our Jenga tower economy is creating an illusion of prosperity and a prosperity for all. And when you think about how small a segment of the population truly is benefiting from this, you end up, I think, deceiving yourself in terms of the strength of the American economy today.”
We usually play Jenga at Thanksgiving but the thought is making me queasy right now, so maybe we will stick to something like Monopoly.
Speaking of monopolies, the tech sector was again in focus this week due to the interesting development that Meta said it plans to use Alphabet’s AI chips. Nvidia responded in a post on X: “We’re delighted by Google’s success—they’ve made great advances in AI and we continue to supply to Google. NVIDIA is a generation ahead of the industry—it’s the only platform that runs every AI model and does it everywhere computing is done.”
Besides this friendly gamesmanship chatter, we also had inflation reports on producer and consumer prices from September that reflected steady levels, but at least no additional upward momentum. While the lack of improvement from a still-elevated level raises concerns, this news would seem to clear the way for another Fed interest-rate cut next week, which had investors feeling full and hopeful in a holiday-shortened trading week.
With that, we wish you and yours a very happy Thanksgiving, and on behalf of our entire team, we want to express our gratitude for our relationship and for your trust and confidence.
Written by a human.