Consumers don’t think things can get much worse: Morning Brief

Wednesday, April 29, 2020

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But it doesn’t mean things are getting better

Like most economic indicators, consumer confidence has fallen off a cliff.

On Tuesday, The Conference Board’s reading on consumer confidence in April fell to a six-year low of 86.9. In March, this reading stood at 118.8. This marks the largest one-month drop since December 1973, according to Bespoke Investment Group.

Additionally, consumers’ current assessment of the business and labor market fell by the most on record in April. And this data follows last week’s check on consumer sentiment from the University of Michigan which was similarly dour.

And if it seems like we’re hammering consumer confidence checks hard in The Morning Brief, we do so with good reason — 70% of GDP growth comes from consumer spending. And right now, consumers are hunkering down en masse. The economy might “re-open” over the next couple months, but it won’t look anything like the economy we saw before the pandemic with consumers feeling like this.

But Tuesday’s report did offer a sign that consumers may indeed agree with economists who have posited that the worst is over for the economy. Or rather, that things won’t keep getting worse after the hard stop imposed on activity in April by widespread shelter-in-place orders.

Consumers’ assessment of the near-term economic outlook improved in April, according to The Conference Board. A sign that consumers don’t expect increasing additional job losses and an accelerating drop-off in economic activity in the months ahead.

In a note Tuesday, analysts at Bespoke said this uptick in short-term expectations, “is an interesting trend to watch because judging by these two indices, consumers appear to be expecting the impact of the COVID outbreak to be relatively short-lived. More importantly, the surveys for this report are conducted in the first half of the month, before the outbreak started to show meaningful signs of reaching its apex.”

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The uptick in consumer expectations, however, comes with two caveats. The first is that expectations cratered in March. The improvement was sequential and off a low base, with Greg Daco at Oxford Economics noting that short-term economic expectations still stand at their lowest level since October 2016.

Additionally, consumers are bearish about their income prospects, a key driver of future spending. Daco writes that “the share of consumers expecting a drop income levels rose to 18.5% from 10.1% in March.” With initial unemployment claims still totaling in the millions each week, one expects this number to rise.

And with several months of rough economic data ahead and a prolonged period of social distancing and significant changes to daily life, consumers saying things “can’t get any worse” is cold comfort.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today

Economy

• 7 a.m. ET: MBA Mortgage Applications, week ended April 24 (-0.3% prior)

• 8:30 a.m. ET: GDP annualized quarter-on-quarter, Q1 (-3.7% expected, +2.1% in Q4 2019)

• 8:30 a.m. ET: Personal consumption, Q1 (-2.3% expected, +1.8% in Q4 2019)

• 8:30 a.m. ET: GDP Price Index, Q1 (+1.0% expected, +1.3% in Q4 2019)

• 8:30 a.m. ET: Core PCE quarter-on-quarter, Q1 (+1.8% expected, +1.3% in Q4 2019);

• 10 a.m. ET: Pending home sales month-on-month, March (-11.0% expected, +2.4% in February)

Earnings

Pre-market

• 6:30 a.m. ET: General Electric (GE) is expected to report adjusted earnings of 7 cents per share on $20.42 billion in revenue

• 7 a.m. ET: Yum Brands (YUM) is expected to report adjusted earnings of $1.73 per share on $3.98 billion in revenue

• 7:30 a.m. ET: Boeing (BA) is expected to report an adjusted loss of $1.76 per share on $17.01 billion in revenue

• 8 a.m. ET: Mastercard (MA) is expected to report adjusted earnings of $1.73 per share on $3.98 billion in revenue

• Other notable reports: Anthem (ANTM), Humana (HUM), Hasbro (HAS), Blue Apron (APRN), Brinker International (EAT), Dine Brands (DIN)

Post-market

• 4 p.m. ET: Qualcomm (QCOM) is expected to report adjusted earnings of 80 cents per share on $5.07 billion in revenue

• 4:05 p.m. ET: Facebook (FB) is expected to report adjusted earnings of $2.06 per share on $17.30 billion in revenue

• 4:15 p.m. ET: eBay (EBAY) is expected to report adjusted earnings of 73 cents per share on $2.34 billion in revenue

• 4:15 p.m. ET: Tesla (TSLA) is expected to report an adjusted loss of 37 cents per share on $5.81 billion in revenue

• 4:20 p.m. ET: Microsoft (MSFT) is expected to report adjusted earnings of $1.28 per share on $33.63 billion in revenue

• Other notable reports: United Rentals (URI), Vertex Pharma (VRTX)

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