Trends & Macro
Consumer sentiment ticked down a pinch, current conditions took a hit (gas pump economics).
About one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs. Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump. Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved and energy prices fall.
Speaking of inflation:
current reading still substantially exceeds the 3.4% reading seen in February prior to the start of the Iran war,
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Only a $0.258 increase in gas prices since this time last week, slipping in under the back-to-back $0.30 mark.
Fun with extrapolation: at this rate we’re looking at $5.00 / gallon gas prices in time for Memorial Day weekend.
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On 4/30, AAA posted this headline: Oil Prices Spike, National Average Up Nearly 30 Cents in One Week
The national average (for regular) was then pegged at $4.300.
Today (5/4), the national average is $4.457. This headline might get recycled this week.
This is Ozempic for wallets.
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Consumers were a wee bit more confident to start April, but that might be because they thought the conflict in the Middle East was winding down. As it’s clear high gas prices are putting a damper on the “present situation.”
Consumers’ write-in responses on factors affecting the economy continued to skew towards pessimism in April. Comments about prices, oil and gas, and war increased in frequency compared to March—a likely signal of consumers’ underlying worries about how the war in the Middle East will impact their pockets.
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Gas Pump Economics
What happens when a vibecession meets an oil cliff?
We might be about to find out.
The world will be short some 350 million barrels of jet fuel and other refined crude products by the end of April
Compounding supply losses are pushing the world toward an “oil cliff” come April 19
average airfare over the past week was $465, up about 25% year-over-year and at least a seven-year high.
Amazon is adding a 3.5% fuel and logistics surcharge for third-party sellers in the U.S. and Canada.
“Elevated costs in fulfillment and logistics have increased the cost of operating across the industry,” Amazon wrote. “We have absorbed these increased costs so far. However, similar to other major carriers, when costs remain elevated, we implement temporary surcharges on our fulfillment fees to recover a portion of the actual cost increases we are experiencing.”
The gas pump is one of the clearest indicators for consumers. Shoppers only feel as rich as their bank account balance, inflation and rising fuel prices eat away at that faster than they’d like.
The summer travel market could be in for a big hit. And if / when shipping increases get passed through to shoppers, it could be an austere summer.
Memorial Day could be sluggish, or it could explode is shoppers enter deal seeking mode and wait for holiday discounts.
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Compared to February, consumers are now more confident about current conditions. Or sentiment is down.
One story is the same across both surveys, expectations are trending down.
Trickle down economics does exist, when the trickle is starting with the slot machine spinning at the gas pump.
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UMich’s survey of consumers showed sentiment dropped, specifically post-Iran action. Before that the vibe was looking up.
I think this read from Northbeam captures it:
The vibes are in free fall. Conflict with Iran keeps spiraling, gas prices are about to explode, and the US lost 92,000 jobs in February, with more likely to come.
People have a visceral response to the numbers they see on the gas pump, and right now those numbers aren’t causing positive reactions. Shoppers now have less money to spend on discretionary purchases.
The vibecession continues.
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UMich’s Survey of Consumers tells a slightly different story, February was basically the same as January.
Wallets are still feeling squeezed:
About 46% of consumers spontaneously mentioned high prices eroding their personal finances; readings have exceeded 40% for seven months in a row.
The K-shaped economy continues to capitalize:
wealthier and higher-income consumers feel better insulated from any possible risks to the economy.
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A sharp deterioration in consumers’ views of the current economic situation weighed on confidence
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Present situation vibes dropped 7 points .
Expectations dipped (again) and have now been below 80 (the unofficial recession signal) since February (maybe giving credence to the rolling recession hypothesis?).
Consumers’ write-in responses showed that references to prices and inflation rose in September, regaining its top position as the main topic influencing consumers’ views of the economy.
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Some good news buried in all the tariff whiplash
The CPI dropped 0.1% in March (gas dropped 6.3%)
All items less food and energy is the lowest it’s been since 2021
The Fed’s not celebrating though
From the recent meeting:
participants remarked that uncertainty about the net effect of an array of government policies on the economic outlook was high, making it appropriate to take a cautious approach. Emphasizing that uncertainty, a majority of participants noted the potential for inflationary effects arising from various factors to be more persistent than they projected.
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