Giving thanks for consumers, the engine of the rebound: Morning Brief

·Editor focused on markets and the economy
·6 min read

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Wednesday, November 24, 2021

US should be most thankful for free-spending consumers

In the interest of expressing gratitude on the Thanksgiving holiday, I’d like to take the opportunity to address a specific criticism leveled at the Morning Brief by one of our loyal readers, who recently wrote to say our newsletter has become “full of too much doom and gloom.”

It should be stated unequivocally that the Morning Brief makes no apologies for calling it as we see it, without biases or sugar-coating. The world is an increasingly complicated and messy place. And it goes without saying that the onset of, and recovery from, COVID-19 has created ongoing strains for businesses, governments, and especially consumers who are personally feeling the pinch of skyrocketing prices.

Having said that, it’s also true that there are also many reasons to give thanks. There are more jobs than people to fill them, the holiday shopping season is shaping up to be less gloomy than expected, and stock markets are perched near record highs — which, among other things, translates into retirement accounts that are in solid shape.

In fact, we should be most grateful for a V-shaped recovery from 2020’s lockdowns that’s been nothing short of extraordinary. For that, we should all give thanks for a factor that former Morning Brief scribe (and currently editor of TKer) Sam Ro rightfully called: the unflappable U.S. consumer.

In a Yahoo Finance appearance last week, Ro was spot on when he suggested that pent-up demand from 2020’s lockdowns — when the virus dissuaded people from traveling, buying, dining out, and threw millions of them on to the unemployment line — is playing a really big role in keeping the economy afloat in 2021.

JPMorgan Chase recently estimated that COVID-19 related restrictions created a staggering $2.5 trillion in savings that would not have occurred otherwise. Much of that pocketed wealth and deferred demand are showing up in spades now, as consumers continue to open their wallets, even as skyrocketing prices eat into their purchasing power.

“It’s fascinating to note that while the supply chain disruptions we’re experiencing are clearly a global phenomenon, the U.S. stands out in how dramatically both longer delivery times and higher prices are affecting the economy,” BlackRock said in a recent research note.

“That is likely driven in part by the fact that the U.S. committed to extraordinary stimulus during (and after) the acute phase of the crisis, which bolstered savings, household wealth and ultimately an extraordinary demand for goods.”

Pent-up demand and savings from 2020's COVID lockdowns have been a saving grace in 2021.
Pent-up demand and savings from 2020's COVID lockdowns have been a saving grace in 2021.

And while yours truly took some heat last week by emphasizing the role higher wages are playing in powering consumer spending, it’s pretty clear that workers — suddenly flush with bigger paychecks because of the labor crunch/Great Resignation — are more willing to open their wallets than they would be during a normal inflationary cycle.

“In all likelihood, this will be another record holiday shopping season as overall, sales are expected to grow between 8.5% and 10.5% this year, and we expect another all-time record in sales, up over 12% [for] Cyber Monday,” Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management, told Yahoo Finance Live recently.

Despite spiking gas prices that prompted the U.S. to tap its strategic reserves, Mahn insisted “the American consumer is still strong.” Shoppers, he said, are “still willing to spend... and that speaks to more opportunities in e-commerce.”

That last bit is integral to the demand surge, as Yahoo Finance’s Dani Romero reported on Tuesday. Consumers have kicked off the holiday season early given supply chain bottlenecks, pushing revenue from web purchases up 18% in the U.S., according to Salesforce digital commerce sales data. Meanwhile, Etsy’s CEO told Yahoo Finance Live that the web retailer is anticipating a “robust” Thanksgiving through Christmas shopping rush.

So while problems abound and things will eventually revert to the mean, it’s always best to look on the bright side. And in an economy powered by consumption, there’s nobody who deserves more thanks than the consumer.

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

Editor's Note: We will be taking a break during the Thanksgiving weekend. The Morning Brief will return on Monday, Nov. 29.

What to watch today

Economy

  • 7:00. a.m. ET: MBA Mortgage Application, week ended Nov. 19 (-2.8% during prior week)

  • 8:30 a.m. ET: Initial jobless claims, week ended Nov. 20 (260,000 during prior week)

  • 8:30 a.m. ET: Continuing claims, week ended Nov. 13 (2.033 expected, 2.080 million during prior week)

  • 8:30 a.m. ET: Advance Goods Trade Balance, October (-$95 billion expected, -$96.3 billion during prior week)

  • 8:30 a.m. ET: Wholesale Inventories, month-over-month, October preliminary (1% expected, 1.4% expected)

  • 8:30 a.m. ET: GDP annualized, quarter-over-quarter, 3Q second estimate (2.2% expected, 2.0% in 2Q)

  • 8:30 a.m. ET: Personal consumption, 3Q second estimate (1.6% expected, 1.6% in 2Q)

  • 8:30 a.m. ET: Core PCE, quarter-over-quarter, 3Q second estimate (4.5% expected, 4.5% in 2Q)

  • 8:30 a.m. ET: Durable goods orders, October preliminary (0.2% expected, -0.3% in September)

  • 8:30 a.m. ET: Durable goods orders excluding transportation (0.5% expected, 0.5% in September)

  • 8:30 a.m. ET: Capital goods orders, non-defense excluding aircraft, October preliminary (0.5% expected, 0.8% in prior print)

  • 8:30 a.m. ET: Capital goods shipments, non-defense excluding aircraft, October preliminary (0.5% expected, 1.4% in prior print)

  • 8:30 a.m. ET: Personal income, October (0.2% expected, -1.0% in September)

  • 8:30 a.m. ET: Personal spending, October (1.0% expected, 0.6% in September)

  • 8:30 a.m. ET: PCE Deflator, month-over-month, October (0.7% expected, 0.3% in September)

  • 8:30 a.m. ET: PCE Deflator, year-over-year, October (5.1% expected, 4.4% in September)

  • 8:30 a.m. ET: PCE Core Deflator, month-over-month, October (0.4% expected, 0.2% in September)

  • 8:30 a.m. ET: PCE Core Deflator, year-over-year, October (4.1% expected, 3.6% in September)

  • 10:00 a.m. ET: University of Michigan Sentiment, November final (67 expected, 66.8 in October)

  • 10:00 a.m. ET: New home sales, October (800,000 expected, 800,000 in September)

  • 2:00 p.m. ET: FOMC meeting minutes, November meeting

Earnings

  • 6:45 a.m. ET: Deere & Co. (DE) is expected to report adjusted earnings of $3.88 per share on revenue of $10.48 billion 

Politics

  • It will likely be a very quiet in the nation’s Capitol today. President Biden is in Nantucket getting an early start on Thanksgiving and Congress is out of session until next week. All that will change when Congress returns to a series of deadlines before year-end, including a possible government shutdown next week.

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