As we all know, inflation has eroded consumers' spending power, and the most basic necessities such as groceries and energy continue to soar. However, even though sentiment indicators show that market sentiment is quite low. Economic growth is slowing, and the supply chain crisis has made goods and services more and more scarce. However, sales data shows that the US consumption recovery does not seem to have been hit. Deutsche Bank analysts have interpreted this, in addition to discount shopping to promote low-cost consumption, The rise in wages and the prevalence of credit consumption may be factors driving the surge in consumption, and these factors may bury hidden dangers for the dollar's outlook.
This week, Deutsche Bank (Deutsche Bank) analysts analyzed management comments from a series of third-quarter earnings conference calls. Both UPS and FedEx (FedEx) claim that they have a "very favorable pricing environment" when demand is difficult to reconcile. Pepsi executives also said: "Pricing flexibility is better than we initially expected in the model." McDonald's found that consumers tend to accept higher prices.
Deutsche's Jim Reid speculated that although inflation has been a major theme in the third quarter report, most companies are optimistic about the acceptance of price increases due to inflationary pressures. "Deutsche Bank found that the frequency of mentioning inflation in the third quarter earnings conference call has increased significantly, reflecting the pressure on the U.S. economy)
The apparent increase in consumer income may be one of the reasons for the upward consumption
According to data from the Economic Policy Institute, the "v"-shaped wage curve that began in April 2021 has resulted in an average hourly wage increase of nearly 5% year-on-year. But, if not all, most of the funds have been swallowed up by the soaring prices of various departments and products (according to the latest consumer price index, more than 6%). However, the data shows that consumers are adapting to the changing environment.
Another possible factor is the prevalence of discount shopping
On Wednesday, Aarthi Swaminaman of Yahoo Finance reported that according to data from credit tracking company Facteus, discount retailers such as Dollar Tree (DLTR), Dollar General (DG) and Five Below (Five) This year's sales soared 65% year-on-year. At the same time, Target and Walmart's third-quarter earnings were boosted, partly because of the increase in the number of shoppers looking for lower-priced items.
The third factor stems from the explosive growth of "buy first, pay later" consumption
Regarding the surprisingly strong retail sales report in October, Bankrate.com senior industry analyst Rothman questioned: "Considering that stimulus measures have been stopped for a long time, where does the money that people continue to spend spontaneously come from?" Higher wages, stocks Prices and home values are part of the squandering, but Rothman also pointed out something very important-namely consumer debt. According to data from the Federal Reserve, consumer debt soared by 8.3% in September.
Rothman said: "But at some point, all of these expenditures will translate into higher credit card debt. This is a trend we have seen in some households, but recently this trend has shown signs of expansion. And high The demand has also further promoted the pressure of inflation and supply chain bottlenecks."
This partly explains the explosive growth of BNPL's "buy first, pay later" consumption. Companies such as Affirm, Klarna, Zilch, AfterPay and PayPal are driving the prosperity of BNPL. A recent Bank of America survey found that 47% of people paid installments through debit cards and bank transfers. It is worth noting that 24% of them stated that they used BNPL because of credit card overdrafts. This is twice the number of respondents in the Bank of America survey in May. These data indicate that BNPL providers need to be vigilant against the risk of default. If there is a sudden shortage of demand, another potentially expanding bubble is at risk of bursting. This chain reaction will hit the dollar's outlook. In the New York market on November 18, the U.S. dollar index continued the decline of the previous trading day and declined slightly. Although the data requested during the day was slightly higher than expected, high inflation has kept the market’s expectations for the Fed’s early interest rate hikes unabated and restricted the U.S. dollar. Decline.