It hasn’t been a good day for economic data so far. Earlier this morning, the NFIB Small Business Optimism Index for the month of June showed a big decline on both an absolute and relative basis. While economists were forecasting the headline index to come in at a level of 98.5 versus last month’s level of 98.3, the actual reading came in at 94.1, which is the lowest reading since March 2014 and the biggest monthly drop (-4.27%) since November 2012. At the current level, the NFIB Small Business Optimism index is back below its average reading of 96.1 going back to 2000 and down over 6% from the post-recession high of 100.4 at the end of last year.
To lead off, the commentary of the report stated that, “While this is not a recession signal, it is a clear sign that economic growth on Main Street is not set for a strong second half.” Things didn’t get much better throughout the commentary of the report as there was little in the way of bright spots. The commentary section then closed off with, “The Index decline is not a disaster, just a big disappointment and another failed attempt to reach a solid growth path. The weakness was substantial and across the board, showing no signs of a growth spurt in our near future.”
As if the NFIB report wasn’t bad enough, Retail Sales for the month of June weren’t any better. On both headline and ex-autos and gas, retail sales missed expectations by more than half a percentage point. Breadth within this month’s report was also weak as 8 of 13 components declined relative to May and half of those eight fell by more than 1 percentage point. Additionally, as shown in the table below, the biggest declines all came in discretionary sectors like Furniture (-1.56%), Clothing (-1.51%), Building Materials (-1.29%), and Autos (-1.06%). Those aren’t the sectors you want to see declining in a period where growth is supposed to be picking up.
While Tuesday’s NFIB and Retail Sales reports were definitely a surprise to Wall Street, they shouldn’t have come as much of a surprise to clients of the Bespoke Consumer Pulse survey that is run monthly by our Bespoke Market Intelligence arm. The Bespoke Consumer Pulse report is a monthly survey of thousands of US consumers on a wide range of topics covering the economy and markets, and it’s designed to give you a live look at how people are spending money, what they’re worried about, and where to be optimistic. Using a statistically representative sample of the US population, Bespoke Consumer Pulse surveys consumers on everything from employment, income, inflation, housing, discretionary spending, autos, smart technology, retail traffic, health care, investors sentiment and a range of other areas. Our survey is designed to provide a snapshot that will let you take the “pulse” of the average American, giving insight into market-moving data events and larger trends before the rest of the market. Bespoke Consumer Pulse is a timely, insightful guide to trends in the US economy.
In this month’s survey released at the end of June, the Consumer Pulse Report saw a noticeable downtick in readings across the economic spectrum. From our commentary section of the most recent report, we noted that,
“While off the lowest levels we’ve measured, sentiment continues to deteriorate across the board. Debt levels appear to be rising, and spending plans continue to fall. Perception of financial conditions is also remarkably weak, standing in stark contrast to extremely strong consumer income and debt readings picked up by traditional macroeconomic stats.
If there were any bright spots to be found in what was otherwise a very negative report, we would say declining credit card delinquencies and higher health care use would be the two. But that really is grasping at straws: month over month, it was a sea of red for almost every indicator we track, with very few exceptions.”
When we originally launched Bespoke Consumer Pulse in 2014, the intent was to launch a comprehensive analysis of the real-time health of the US economy and catch potential turning points as they happened ahead of the official data. Our negative findings regarding the US economy in June coupled with today’s big misses in both the NFIB and Retail Sales reports provide another example of why the Consumer Pulse Report is a monthly must-read for any active market participant. Our July report will be out at month’s end, and you can receive it for free by signing up for a 30-day free trial today! Use “thinkbig” in the coupon code section of the Pulse Subscribe page to receive a huge member discount. Also, if you would like to receive updates on Bespoke Market Intel’s primary research, survey analysis, samples, and other special offers, sign up for the free mailing list by clicking the button below.