Consumer confidence remains measured while Wall Street booms
Yahoo Finance’s Julie Hyman, Myles Udland and Brian Sozzi discuss how the pandemic has impacted consumer confidence on different levels across the U.S.
Video Transcript
MYLES UDLAND: Let's talk a bit more this morning about what's happening on the consumer front. We've obviously talked quite a bit about how Wall Street is upgrading its outlook for economic growth this year. We've seen the market certainly priced in, extremely optimistic outcomes. And fourth quarter earnings certainly starting to back that up.
But consumers are still materially lagging, I think, where Wall Street is at in this recovery. Yesterday, we got some data from the Conference Board showing consumer confidence. A very slight uptick from the prior month in February. But as we see on this chart, consumer confidence has really done nothing over the last couple of months.
We had a couple of highs in September, October, November. Things appeared to be turning around, and then, as public health experts warned, a massive winter surge. It got cold, it's been very snowy, obviously the weather has been also unprecedented. You think about what's been happening in Texas as an example of that.
And it's not been a great couple of months for most consumers. We also have about 10 million fewer jobs in the US than we had a year ago. And Julie, I know that, you know, ultimately, consumer confidence doesn't necessarily track where the S&P 500 goes. But there is certainly a question in my mind, at least, as to how this tension resolves.
I can't imagine that consumers remain about as, cautiously optimistic is the word the Conference Board used, while Wall Street continues. It would seem, right, there has to be some meeting in the middle, or we're all just going to catch up massively to where investors are.
JULIE HYMAN: Well, I would say a couple things. First of all, I want to bring up the fact that we just got new home sales in the last few moments. January, new home sales, 923,000. That's the annual pace. It's above estimate, it's up a little more than 4% on a year over year basis.
So whatever consumers are saying in terms of confidence, they are doing things like making purchases, right? And we always have to talk about that gap between how consumers feel, what they're saying, and what they're actually doing. Now, we also know, of course, a lot of them are holding back on spending. We did see those retail sales in January. But we also know the savings rate has gone up.
The other thing I would say is there seems to be this emerging discussion and debate over messaging and tone from the CDC and other public health officials that perhaps they are being overly cautious when it comes to some of their current guidance on coronavirus, particularly for individuals who have gotten the vaccine. And so I think that speaks to the consumer confidence issue as well, that if people are still feeling afraid to go out, once those sorts of concerns are perhaps resolved a little bit more, then perhaps you see the unlocking.
I saw a good analogy yesterday, I can't remember who did it or I would give credit, on Twitter. It talked about how the CDC also tells you only to eat your steaks well done. And most of us don't do that, right? That there is this sort of public health priority that tends to be more conservative. And then there's the stuff that people actually do.
Because coronavirus is new, because it's scary, because it's deadly, people have tended to follow the letter of that guidance, at least people in the Northeast, where we saw the virus first hit really hard maybe less than the rest of the country. But you do wonder, as people try to sort of get adjusted with their real life reading of that guidance, you'll start to see that consumer confidence number change.
BRIAN SOZZI: You know, it does amaze me. And to your point, Julie, the confidence measures, they will say one thing, but consumers, at least right now, the early anecdotes we're getting from these retail earnings, they're out there spending. And they're spending in a big way. Maybe not so much in apparel, but certainly within the home department.
TJ Maxx, you know, their home goods division, 12% same store sales increase in the fourth quarter. And the momentum looks to have continued into February, which is obviously good for TJ Maxx. But it gives a strong indication on the consumer. And an interesting stat I just got from Jefferies retail analyst Brent Thill.
He ran a survey recently, said 20% of respondents engage in do-it-yourself home improvement projects last year and bought a drill for the first time. So you have people at home, I think folks that do have money, that are maybe not really being captured, I think, effectively in the confidence measures. They're out there and they're buying lots of stuff and really spending a lot on home improvement projects.
So clearly they have money, and they're getting it from somewhere.
MYLES UDLAND: Yeah, and Julie too, I think that that whole messaging conversation is one that we'll probably have for many years after the pandemic is over and look back and say, for obvious reasons, things in 2020 weren't handled a certain way. But the way with which you've had to have course corrections from authorities that have both been not listened to and then not trusted and then contradicted themselves and how that all fits into this picture of sort of where we are all trying to head.
And I think what's interesting as well, and to bring it back to the economy, is that the data still reflects, I think, not exactly reality. Because as you mentioned, you leave the Northeast, things are mostly open. Things are pretty much, I wouldn't call them normal, but you wouldn't say, oh, there must be a global pandemic going on.
And so the numbers, however, reflect more of what I would think is the lived reality, what seems to me the lived reality here in New York City, which is very much a pandemic vibe. And so how that all squares, I think, as we get into the second half of this year, certainly get into this summer, is going to be a fascinating dynamic to see.
And again, it's why we continue to ask most of our guests, are we still being too conservative as it relates to potential economic growth in the second half of this year?
