Affirm’s Post

Our recent survey findings underscore just how important and valuable Affirm is for consumers in any economic weather. Read more below ⬇️

Sharing this from my latest Railroad Weekly issue, on the U.S. economy.... important to recognize the enormous wealth creation from rising home prices, stock prices, and interest rates (but not everyone owns homes, stocks, and savings): " The latest retail sales report for May, published last week by the U.S. Census Bureau, showed a slight rise in month-to-month spending. Americans spent $703.1b on retail goods and food services last month, up from $702.5b in April. The data is seasonally adjusted but not inflation-adjusted. Keep in mind that U.S. consumers spend a lot more on services than they do on retail goods (think health care, housing, higher education, leisure travel, etc.). But retail spending is nevertheless a closely-watched barometer of the health of the U.S. economy, and the latest figures seem to indicate that spending levels are still healthy if cooling off. That’s perhaps unsurprising given the healthy job market and the sharp runup in asset prices, specifically stocks and houses. Americans are also earning substantial amounts of interest on their savings now. And that’s a counterintuitively stimulative effect of the Fed’s rate hikes (they’re supposed to be an anti-stimulant). Apollo’s chief economist Torsten Sløk estimates that Americans are currently earning some $500b a year just by parking their savings in money market funds. Of course, Americans who don’t own stock, or don’t own a home, or don’t have savings to park are in a different situation. And many companies and banks are starting to note that lower-wealth Americans, even if they have jobs, are slowing their spending or relying more on credit cards." #useconomy

US Consumer sentiment increased 3% in September compared with August It was the second consecutive month of consumer sentiment increases, according to the newest survey from the University of Michigan The increase was across all education groups and political affilitations, the survey noted Consumer sentiment for long-term economic expectations are currently 4% above their historical average Americans' attitude about the economy rose 3% last month compared with August, according to the latest Surveys of Consumers from the University of Michigan. “While there are some signs that consumers perceive a slight deterioration in labor market conditions, they do not expect substantial effects on the economy,” Surveys of Consumers Chief Economist Joanne Hsu said in a statement. The current unemploment rate is 4.2%, according to the Bureau of Labor Statistics. While higher than the 3.8% rate one year ago, it's lower than the long-term average of 5.7%. “Consumers recognize that labor markets have been relatively strong, and they expect that the Fed will step in to prevent unemployment rates from spinning out of control," Hsu said. "In fact, consumer expectations for the economy have been on an upswing, as they expect interest rates to continue falling in the year ahead.” Last week, the Federal Reserve cut its benchmark interest rate by half a point in response to a softening labor market. Many economists expect the Fed will cut rates again before the end of the year. Expectations for the future are 13% higher than they were a year ago but are below their historical average due to persistently high prices. Inflation is currently at 2.5% — the lowest level since February 2021, according to the Bureau of Labor Statistics. Consumers expect inflation to continue decreasing in the coming year, the survey found. Consumer sentiment for the long term is currently 4% above the historical average.  #usconsumersurvey https://lnkd.in/d_i7ACs7

A blistering crash for global markets sent Americans’ stocks and investments tanking Monday and raised fresh fears of recession. But the waters appeared to be calming Tuesday, and the message from economists and Wall Street analysts is that the U.S. economy is going strong — in large part because people keep buying stuff. Get a curated selection of 10 of our best stories in your inbox every weekend. American households have endured plenty over the past few years: soaring inflation, steep interest rates and other shocks such as high gas prices. And they have pulled back a little, opting for cheaper options on groceries, cars and a slew of other swappable items. That is especially the case for lower-income Americans with fewer options to scale down, fall back on savings or adjust their budgets. Consumer spending — which makes up roughly 70 percent of the country’s gross domestic product, a measure of the size of the overall economy — has stayed solid through it all. But the perpetual fear among economists and policymakers is that the spigot will turn off at some point, and that a recent pileup of less-than-desirable data points suggest early signs of trouble. Analysts and officials highlight that businesses, households, and the economy have remained resilient despite high interest rates and inflation. Consumer spending has kept sectors like restaurants, hotels, and concert venues active, leading to more hiring. Overall, the economy is still strong. It grew more than expected in the second quarter, and wages are outpacing inflation. June retail sales were solid, with online sales up nearly 2% and food and drink establishment sales growing slightly. Reduced gas spending likely reflects cheaper gas freeing up cash for other purchases. Currently, there is a clear divide: wealthier Americans are maintaining robust spending, while other businesses and households struggle to keep up. The Federal Reserve Bank of New York reported a 1.1% increase in total household debt in the first quarter. Nearly 9% of credit card balances and almost 8% of auto loans became delinquent annually. The unemployment rate rose to 4.3% in July, the highest since 2021. Businesses observing consumer behavior see this divide clearly. In May, Walmart executives noted that many consumers were still financially stretched, spending more on essentials. Recently, Aldi and other grocers have announced significant price cuts on pantry staples and seasonal items. Target, for example, offered $1 pool noodles, $5 pool floats, and $15 coolers in its summer deals. These discounts aren't due to consumers completely pulling back but highlight small spending adjustments that can add up. PepsiCo CEO Ramon Laguarta noted in July that some consumers are seeking more value, affecting certain parts of their portfolio. A key question is how the Federal Reserve will respond as it faces criticism for potentially lagging behind and jeopardizing households and businesses.

U.S. consumer sentiment fell sharply in May to the lowest level in six months as Americans cited stubbornly high inflation and interest rates, as well as fears that unemployment could rise. The University of Michigan’s consumer sentiment index, released Friday in a preliminary version, dropped to 67.4 this month from a final reading of 77.2 in April. May’s reading is still about 14% higher than a year ago. Consumers’ outlook has generally been gloomy since the pandemic and particularly after inflation first spiked in 2021. Consumer spending is a crucial driver of growth. Sour sentiment about the economy is also weighing on President Joe Biden’s reelection bid. Still, consumer confidence surveys have not always been reliable guides to actual spending, economists note. “Perceptions don’t always match reality and we think the fundamental backdrop remains strong enough to keep consumers spending,” said Oren Klachkin, an economist at Nationwide Financial, in a research note. “Rising incomes offer a healthy offset and will prevent consumer outlays from retrenching on a sustained basis.”

Americans are rapidly becoming much more upbeat about the economy. Consumer sentiment leapt 13% in the first half of January from December, the University of Michigan said Friday. That came on the heels of a sharp rise in December, causing the index to surge a combined 29% from November, the biggest two-month increase since 1991. The pickup in sentiment was broad-based, spanning consumers of different age, income, education and geography. The recovery in sentiment “is likely to provide some positive momentum for the economy,” said Joanne Hsu, the Michigan survey’s director. Persistently high inflation, the lingering shock from the pandemic’s destruction and fears that a recession was around the corner had put a damper on feelings about the economy in recent years, despite solid growth and consistent hiring.  Now Americans are bucking up as inflation cools and the Federal Reserve signals that interest-rate increases are likely behind us. And with the solid labor market putting money in the bank accounts of freely spending consumers, recession fears for 2024 are fading.  Despite the recent sentiment gains, the measure is still about 20% lower than before the pandemic took hold in 2020 and nearer to levels consistent with an economy just emerging from a downturn—not one that recorded surprisingly strong growth last year.  “Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations,” Hsu said. “Democrats and Republicans alike showed their most favorable readings since summer of 2021. Sentiment has now risen nearly 60% above the all-time low measured in June of 2022 and is likely to provide some positive momentum for the economy.” Along with the improved outlook on general conditions, survey respondents displayed more confidence that inflation is coming down. The outlook for the inflation rate a year from now declined to 2.9%, down from 3.1% in December for the lowest reading since December 2020. The Federal Reserve has boosted short-term interest rates to their highest level in more than 22 years and inflation has followed suit lower, though it remains above the central bank’s 2% target. At the same time, the survey’s index of current conditions also leaped higher, rising to 83.3, or 21.6% higher than a year ago. Consumer sentiment has improved amid a drop in gasoline prices and solid stock market gains. The price at the pump for a gallon of regular gas is about 30 cents lower than it was a year ago, according to AAA, and the S&P 500 is near a record high. The survey is “another sign that the economy is on track for a soft landing,” said Andrew Hunter, deputy chief economist at Capital Economics. However, he noted that such surveys don’t always feed through to consumer behavior.

In August 2024, the US consumer market paints a picture of a bifurcated economy. On one side, higher-income households continue to show resilience and optimism, supported by solid job growth and rising asset values. On the other, lower-income consumers navigate a return to pre-pandemic norms. #Economy #Consumer #Income #Spending

The overall #economy continues to toy with us — sending mostly positive, but mixed signals as Tim Smart points out in U.S. News & World Report. Yes, inflation staged a comeback in January, but consumers continued to accelerate their online spending at a rate eclipsing inflation, Signifyd #EcommercePulse data shows. It will be interesting to see what the U.S. Census Bureau has to say tomorrow about the month's retail sales. Whatever the number, I'm betting #ecommerce will outdo overall #retail performance. https://lnkd.in/gR5rXm_g

Fascinating detail underneath today's #consumer #confidence figures. Overall small decline reflects peoples' views about economy (left panel), not their own finances. On latter, views stayed neutral (so much better than the overall -21 reading). Green shoots? #dataisbeautiful The February reading of the UK's consumer confidence by GfK was disappointing: confidence declined from -19 to -21, against expectations that it would improve somewhat. More robust retail sales in January and receding inflation, coupled with a continued strong job market, were reasons to believe households would be feeling better about their financial situation. Curiously, that is indeed what a deeper dive into the consumer confidence data shows: households' view of their own financial situation (light blue line, right hand panel) was in fact unchanged, and - at zero, rather than a big negative number - considerably more bullish than the overall index. At the same time, people's expectations for the overall economy declined across the board. Respondents were more pessimistic than in January about overall economic conditions, inflation, and unemployment. Granted, these figures tend to be volatile and we shouldn't read too much into movements from one month to another. Overall, this is not an unusual picture. In general, in all kinds of surveys, people tend to see their own situation as more positive than the environment around them. [E.g., in organisational surveys, people systematically say their own team is managed better than the broader organisation, or that their own team's values and behaviours are more inclusive and engaging, etc. And the same applies to many economic surveys.] The data on the economic outlook is particularly mixed at the moment, but I take this as one other data point in favour of a more positive outlook for 2024.

SF Fed reports on US consumer savings rate dropping rapidly. This may be one of the key causes of Q1 2024 same stores sales of fast food and fast causal restaurants are down 7% vs Q1 2024 ( even worse when you add price increases due to inflation) : We estimate that excess savings at the aggregate level peaked at $2.1 trillion in August 2021 and were steadily depleted over the subsequent 2½ years. Households drew down their excess savings at an average pace of $70 billion per month since September 2021, although this drawdown accelerated to about $85 billion per month since last fall relative to the average pace for the entire period.