Consumers Singing Loud for All to Hear

Source: Economics Group of Wells Fargo Bank, N.A. Summary Consumer sentiment jumped in early December amid the recent move lower in gas prices and push higher in equity values. Expectations are supportive of a decent pace of spending, just in time for the holidays. There’s Room for Everyone on the Nice List Consumers perceptions are not always the best indication of their spending habits. This divergence in what consumers ‘say’ versus what they actually do has been on full display this year. While consumer sentiment has languished, consumer spending has pushed full steam ahead and supported broader economic growth. Consumer sentiment rose 8.1 points, or by the most since March 2021, to 69.4 in early December (chart). The jump higher in consumer sentiment isn’t too surprising to us given the recent move lower in gasoline prices and upward move in equity markets. The question: will the sentiment boost lead to a sugar rush for spending just in time for the holidays? Expectations of coming conditions tend to have better predictive power of actual consumption, and the 9.6 point gain in expectations to 66.4 suggests a decent pace of spending in early December (chart). We’ll get November retail sales data next week, in which we anticipate some weakness as we forecast a 0.2% decline in overall sales. The move lower in expectations in November and spending on credit cards tallied by the Bureau of Economic Analysis suggest some downside. If higher expectations are sustained through the month of December, however, we could see more of a bounce in spending to end the year. Ultimately, we anticipate consumer purchasing power remains intact through the final months of the year and should support holiday spending amid still elevated wage growth and slowing inflation, particularly for gasoline. READ FULL ARTICLE >>