Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)While in line, we’ll take in line with regards to the April PCE inflation stats. They rose .3% headline and .2% core m/o/m and by 2.7% and 2.8% y/o/y, unchanged with March.

2)The May consumer confidence index from the Conference Board rose to 102 from 97.5 but it was 103.1 in March, 104.8 in February and 110.9 in January. It was 132.6 in February 2020. The Present Situation and Expectation components both rebounded from the April drop with the latter doing a bit better than the former. The one year inflation expectations component rose to 5.4% from 5.3% and that is a 5 month high. The answers to the job questions were mixed. Spending intentions were mixed too. The bottom line from the Conference Board, “the overall confidence gauge remained within the relatively narrow range it has been hovering in for more than two years.” But, “The survey also revealed a possible resurgence in recession concerns. The Perceived Likelihood of a US Recession over the Next 12 Months rose again in May, with more consumers believing recession is ‘somewhat likely’ or ‘very likely.’ “

3)The May Richmond manufacturing survey saw no growth but no contraction either as it was exactly zero vs the forecast of -7.

4)From Costco: "As inflation has leveled off, our members are returning to purchasing more discretionary items. And growth in the category was led by toys, tires, lawn and garden and health and beauty aids."

5)From Dollar General: They reported a 2.4% quarterly comp gain and "was driven by strong growth in consumer traffic of more than 4% and was partially offset by a decline in average transaction amount primarily driven by fewer items per basket. The comp sales increase was driven entirely by strong growth in our consumable category, by customers relying on us for the value of the items they need more often for their families. This growth was partially offset by declines in the home, seasonal, and apparel categories."

6)From Burlington Stores: "As we described in our last earnings call on March 7th, our February sales trend was softer than we had anticipated. We believe this was attributable to disruptive winter weather as well as the slower pace of tax refunds vs February of 2023. As we have discussed in the past, our core lower income shopper is sensitive to the timing of tax refunds, specifically refunds related to the earned income tax credit. As you might expect, as tax refunds began to normalize, our sales trend improved as the quarter unfolded."

7)From Dick’s Sporting Goods: Their 5.3% comp gain "was driven by growth in transactions and in average ticket" and they continued to take market share. They mentioned "strength across footwear, athletic apparel and hardline…As a result of our strong Q1 performance, our expectations for continued robust demand from athletes and the confidence we have in our business, we are raising our full year outlook...the consumer is absolutely putting a priority on a healthy and active lifestyle. You see people running and walking, being outdoors."

8)From Chewy: "While it is premature to declare an industry turnaround, we maintain our perspective that the pet industry is on track towards normalization."

9)From Abercrombie: "We entered the year in a clean inventory position and maintain that discipline through Q1, allowing for fewer promotions, which contributed to gross profit rate improvement."

10)From Box: "we are starting to see some degree of stabilization. Again, that's different from any kind of inflection point that sort of looking like we're out of the woods on the macro front, but sort of the lack of increase of headwinds I think has been notable in the past couple of quarters. We had strong performance especially in our US enterprise business and federal. I think we're still seeing some degree of pressure on the small and median business segment, but when we look at the business overall, on balance, we were happy with the performance in Q1."

11)May CPI in Tokyo, the precursor to the national figure, rose 2.2% headline and 1.7% ex food and energy y/o/y. The former was as expected while the latter was one tenth light. Education subsidies are keeping a lid on core inflation. The headline figure reflects utility bill subsidies.

12)Vietnam, a manufacturing presence that is only growing, reported May exports up by 15.8% y/o/y, more than the estimate of up 10.6%. Imports jumped by 30% vs the forecast of up 20%.

13)The Eurozone Economic Confidence index for May rose to 96 from 95.6. Part of the reason was a 4th month in a row of improving consumer confidence in the region. 

14)German consumer confidence continued to improve as the GFK index rose to -20.9 from -24 and better than the estimate of -22.5. They said, "Falling inflation rates combined with significant wage and salary increases are strengthening consumer purchasing power. This has a stimulating effect on income expectations and also reduces consumer uncertainty, which was also reflected in the comparatively high propensity to save in previous months."

Negatives,

1)Personal spending in April was a touch light and combined with the higher than expected goods trade deficit has the Atlanta Fed’s GDPNow Q2 forecast dropping to 2.7% from 3.5%. The income component for April was as expected and the savings rate held at 3.6%, matching the lowest since November 2022.

2)Sounding much more like a 1-1.5% type economic growth rate, the Fed’s Beige Book of 12 Districts said, “Most Districts reported slight or modest growth, while two noted no change in activity.”