Consumers in a Funk

June 29, 2022

Consumer hope around the world is being squeezed by high inflation, rising interest rates, and dismaying political developments. Many consumer sentiment measure have been reported during the past 24 hours.

The Conference Board’s U.S. consumer sentiment index tumbled 4.5 points to a 28-month low in June. The drop exceeded analyst expectations.

Japanese consumer confidence fell 2 index points to an 18-month low in June.

The preliminary estimate of euro area June consumer confidence — a 26-month low of -23.6 — was confirmed.

Swedish consumer sentiment plunged 5.8 index points to a 326-month low.

South Korean consumer confidence dropped 6.2 points to an 18-month low this month.

German consumer sentiment set another record low. Austrian consumer confidence also fell to a record trough.

South African consumer confidence tumbled to a 144-quarter low in 2Q 2022 from -13 in the first quarter.

In financial markets overnight, the dollar was narrowly mixed, rising 0.3% against the yen and sterling and 0.2% relative to the Australian and New Zealand dollars but falling by 0.7% versus the Swiss franc, 0.2% against the yuan and peso and 0.1% relative to the Canadian dollar and Mexican peso. Prices for gold and WTI oil rose 0.4%, but bitcoin’s price fell 1.0%. Ten-year sovereign debt yields slid four basis points in Germany, 2 bps in the U.K. and a basis point in the United States. The U.S. equity selloff on Tuesday carried over into Asian and European markets today. U.S. stock futures haven’t moved much yet, however.

U.S. GDP growth last quarter was negative and has been revised to a marginally larger decline of 1.6% at an annualized pace. Personal consumption grew 1.8%, down from a 2.5% advance in the final quarter of 2021, and was responsible for 1.25 percentage points of GDP growth. Non-residential business investment made a similar positive contribution to economic growth, but these plus-factors were outweighed by negative contributions of 3.23 percentage points from the current account, 0.5 percentage points from a shrinkage of real government expenditures and 0.35% from inventories. The personal consumption price deflator posted a year-on-year 6.3% advance, up from 1.8% a year earlier.

Economic sentiment in the euro area weakened less than feared in June but by enough to represent a 15-month low. The reading of 104.0 would have been lower if not for 7- and 2-month highs of sentiment in the services and industrial sectors. Construction suffered a large drop in confidence, and the retail sector faltered too. Employment sector sentiment fell 1.7 index points and highlighted the weakest expectations since April 2020.

Investor expectations toward Switzerland plunged to an 88-month low of -72.7 in June from -52-6 in May and +51.3 in June 2021.

Business confidence deteriorated to 7- and 5-month lows in Portugal and Sweden and to 14- and 21- month lows in the Netherlands and Denmark. 14-month lows in Finnish and Greek business confidence were also reported.

Among reported price data today, Spanish CPI inflation accelerated to a 446-month high of 10.2% in June from 8.7% in May and 2.7% in mid-2021. Belgian CPI inflation of 9.65% in June was the most in 476 months.

Icelandic CPI inflation of 8.8% in May was the most since late-2009, but producer price inflation settled back to a 2-month low of 27.2%.

Singapore‘s 31.4% rate of producer price inflation in May was at a record high.

But German CPI inflation unexpectedly settled back 0.3 percentage points to 7.6% this month.

In Hungary, Magyar Nemzeti Bank’s base rate has been lifted by a greater-than-forecast 185 basis points to 7.75%. This was the 13th straight monthly tightening of monetary policy and surprised analysts because the 50-basis point rise done in May had been only half the size of the previous two increases. The pandemic low basie rate level had been a mere 0.60%, which began to be normalized when inflation moved above 5% in June 2021. Now CPI inflation is at 10.7, its highest point in 21 years. Currency depreciation has been a further concern of Hungary’s Monetary Council.

In spite of the weakness of Japanese consumer confidence, retail sales there posted a third straight month-on-month advance and lifted the 12-month rate of increase to a one-year high of 3.6%.

Australian retail sales climbed 0.9% in May, matching April’s monthly rise and marking the eighth increase in nine months.

Spanish retail sales stagnated in May but were 1.4% above the year-earlier level.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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