Some Consumers Are Very Confident
This week has dealt us conflicting reports on retail sales and consumer attitudes. Yesterday's report from the Commerce Department on consumer spending told of a strong increase, some voluntary, some not:
Purchases rose 0.8 percent, the biggest gain since February, after a 0.1 percent decline the prior month, Commerce Department figures showed today in Washington. Incomes grew 0.3 percent and the savings rate dropped to a four-month low...
Cars and light trucks sold at a 12.2 million seasonally adjusted pace of in July, up from 11.4 million in June, according to industry data. The rate trails the 12.6 million average pace through the first half of the year...A lot of consumer spending went up in smoke, however, as people cranked up the air conditioning in the unusual heat.
But that was July: the S&P 500 started the month at about 1300, but stock prices fell about 15 percent in just a week, coincident with Standard & Poor's downgrade of the U.S. government's credit rating, and the market's realization that our short and long-term fiscal future is in such weak hands.
Therefore today's consumer confidence report, from The Conference Board, shows sentiment at a two-year low:
[The] index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, figures from the New York-based research group showed today. It was the biggest point drop since October 2008.But confidence isn't flagging for all consumers -- especially the ones at the top of the scale. The New York Times tells us that bookings at super luxury hotels are just grand:
Paul James, global brand leader for Luxury Collection - a group of 79 hotels that comply with brand service standards, of which Starwood manages 41 and owns 10 - said the company "has not seen any immediate change in demand" in the wake of the stock market's recent gyrations.
"We're confident that even if there is turbulence in the market, it's the right time to talk about the Luxury Collection, to remind people about our great destinations," Mr. James said. "We will keep our eye on the market, and if we see any change in our business, at that time we'll adjust our strategy."That's fabulous. And strong earnings are out from Tiffany's, says The Wall Street Journal:
The Weekend Financial Times contrasted the poor showing at supermarkets in the U.K. with companies selling luxury goods:
US consumer confidence is at lows not seen since the oil price-inspired recession in 1980. In the UK, consumers feel only slightly less bad then they did when Lehman went bankrupt, and when interest rates soared in 1990. The mood in many European countries is almost as dark.
The effects of the dark mood on retailers are easy to see. Consumer pessimism is permeating businesses normally resilient in bad times. Ahold, the Dutch grocer with operations in the US and Europe, has announced a 21 per cent drop in quarterly profits from last year. At the Co-operative Group, a UK grocer, the first-half fall was 12 per cent... Even brewers are struggling; Heineken has cut is 2011 growth forecasts to zero.
But not everyone is down in the dumps and for companies catering to rich people life is good. On Friday, fancy jewellery maker Tiffany unveiled a one-third increase in its second-quarter profits compared with last year... LVMH and Richemont have each returned investors about 60 per cent, and investors in high-end rival Hermes have received back their investment fourfold. All three trade above their pre-recession highs.We've been hearing for a long time that the job creators, the upper income group, are too uncertain to hire more people at their own companies. Maybe there are at least a few new jobs on the sales floor at Tiffany's.