Early Warning on the Economy?

[Rianne]

I found this article interesting as we all point fingers at inflation, but is it? Consumers are spending, so why not up the price of things?

https://www.cnn.com/2023/06/09/economy/us-inflation-high-prices-consumer-demand/index.html

"The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.

That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.

More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices."

 

[djsander]

Subway does work on an independent franchisee model. I feel kinda bad for the small business owners getting screwed by their corporate overlords, but that's how things work in that market.

The fact that they franchisees don't want to honor coupons that the corporate marketing folks distributes says a lot about how the company is run.

The good news is that we're starting to see Jersey Mike's and Firehouse Subs popping up around here. When one company falters, there's always another ready to step up to the plate. Frankly, I don't see subs as the quick, easy, cheap meal they used to be. If I'm going to spend that kind of money on take-out food, there are other options.

Haven’t been in subways for years as they seemed to get to the point on how thin the meat can be sliced and how little you get. We like Firehouse, but haven’t been in one for several years. Tried Jersey Mikes and they are pretty good. We have opted for Scholtskys when we want a sandwich. More expensive, but a lot of meat and we get two meals out of them.

 

[Surewhitey]

I found this article interesting as we all point fingers at inflation, but is it? Consumers are spending, so why not up the price of things?

https://www.cnn.com/2023/06/09/economy/us-inflation-high-prices-consumer-demand/index.html

"The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.

That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.

More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices."

You lost me at Cleveland...

 

[Koolau]

You lost me at Cleveland...

Yeah, spent a week there one night.

 

[explanade]

And yet, GDP growth just had a record quarter:

https://www.reuters.com/world/us/us-economic-growth-accelerates-third-quarter-2023-10-26/

Not sure I see a record but it beat expectations. And inflation as measured by the core PCE very low at 2.4%.

If we can have steady growth and low inflation that would be nirvana. But according to the report, the GDP growth was fueled by pulldowns of savings and increases in credit card debt. Accordingly, this does not appear to be sustainable.

But I would expect it takes us into 2024 minimum.

Third quarter GDP print was 4.9%. That will be revised later but still is about double the expected GDP growth.

I think consumer spending was the biggest component, up around 2.7%.

 

[aja8888]

Third quarter GDP print was 4.9%. That will be revised later but still is about double the expected GDP growth.

I think consumer spending was the biggest component, up around 2.7%.

Yes, we are still spending like drunken' sailors out here!

 

[SecondCor521]

I hear rumblings of spending based on borrowed funds. Certainly some people will and others won't, but it's anecdotes I'm hearing lately.

I'm also hearing people talk about job losses, layoffs, severances, early retirements, etc. Again, just anecdotal. But it's what one would expect to be hearing about now. Would indicate lower GDP growth upcoming.

I'm always optimistic, so I'm hopeful we'll end up with a mushy air pocket recession which is mild, short lived, and maybe doesn't hit everyone or every area of the economy. That is a common view but not necessarily even the consensus currently. Time will tell.

My son's business is doing really well. September was his best month ever, and October this year is much better than October last year. But his customers tend to be older and higher income / dual income and thus not impacted as much by economic cycles.

 

[JoeWras]

Yes, we are still spending like drunken' sailors out here!

Drunken Amazon shoppers?

 

[Montecfo]

Third quarter GDP print was 4.9%. That will be revised later but still is about double the expected GDP growth.



I think consumer spending was the biggest component, up around 2.7%.

Atlanta Fed was projecting 5.4% for some time. That seemed preposterous but I gave it some weight.

 

[Montecfo]

I hear rumblings of spending based on borrowed funds. Certainly some people will and others won't, but it's anecdotes I'm hearing lately.

I'm also hearing people talk about job losses, layoffs, severances, early retirements, etc. Again, just anecdotal. But it's what one would expect to be hearing about now. Would indicate lower GDP growth upcoming.

I'm always optimistic, so I'm hopeful we'll end up with a mushy air pocket recession which is mild, short lived, and maybe doesn't hit everyone or every area of the economy. That is a common view but not necessarily even the consensus currently. Time will tell.

My son's business is doing really well. September was his best month ever, and October this year is much better than October last year. But his customers tend to be older and higher income / dual income and thus not impacted as much by economic cycles.

Credit card debt hit a record $1T and saving declined. Beginning to payoff student loans is going to take a bite out of discretionary spending to the tune of $70B+ per month.

 

[pb4uski]

A McDouble has the same 2 patties as a Big Mac but at half the price and with less bun. You can get 2 for $7.

Perhaps two all beef patties, but no special sauce, lettuce, cheese, pickles, onions or sesame seed!

I'll get 2 for $7 next time I'm there.

 

[explanade]

Speaking of anecdotes, there are some By Now, Pay Later promotions which are seeing a lot of take-up.

Perhaps the new subprime.

 

[GravitySucks]

A McDouble has the same 2 patties as a Big Mac but at half the price and with less bun. You can get 2 for $7.

$3.50 each!

Last I looked they were $2 each. I was used to them being on the $1 then the $1.25 menu so I passed. Picked up HappyMeals for some kids and they were only about a buck less than the kids meal at a local restaurant with actual food so that’s the last time I do that unless we’re traveling.

I see MCD earning up 14% but frequency of returning customers is down. Count me as one that won’t be going often.

 

[Koolau]

$3.50 each!

Last I looked they were $2 each. I was used to them being on the $1 then the $1.25 menu so I passed. Picked up HappyMeals for some kids and they were only about a buck less than the kids meal at a local restaurant with actual food so that’s the last time I do that unless we’re traveling.

I see MCD earning up 14% but frequency of returning customers is down. Count me as one that won’t be going often.

I still recall the promotion "Change Back From Your Dollar." Don't know if that was McD or BK. One of those two.



Imagine change back from your dollar for a full burger meal!

 

[Stormy Kromer]

I'm glad I learned how to cook.

 

[JoeWras]

I still recall the promotion "Change Back From Your Dollar." Don't know if that was McD or BK. One of those two.

Trip down memory lane.

 

[Winemaker]

And yet, GDP growth just had a record quarter:

https://www.reuters.com/world/us/us-economic-growth-accelerates-third-quarter-2023-10-26/

It has been reported by several news organizations that the entertainment business is responsible for the high number, depite trucking companies going out of business, falling freight rates and an auto strike.


https://www.cbsnews.com/news/taylor...-tourism-federal-reserve-how-much-money-made/

 

[MichaelB]

Straight from the BEA (here)

The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were housing and utilities, health care, financial services and insurance, and food services and accommodations. Within goods, the leading contributors to the increase were other nondurable goods (led by prescription drugs) as well as recreational goods and vehicles. The increase in private inventory investment reflected increases in manufacturing and retail trade. Within nonresidential fixed investment, a decrease in equipment was partly offset by increases in intellectual property products and structures.

This was a strong, broad based increase with all sectors showing good growth. Compared with the preceding quarter durable goods, including autos, increased at the heady rate of 7.6% and gross private investment at 8.4%. Even goods exports were up strongly.

The full announcement, including data, can be found here

 

[11522914]

Same here, our subway doesn't honor the coupons

I thought they were a franchise

Does anyone have a subway that actually takes coupons?

None of them around here do. They lost my business with their coupon shenanigans and high prices.

 

[rayvt]

There was one here that I tried to use a coupon at a couple of years ago and they said "Oh, we are not a participating store." So I said, "In that case, cancel my order."

Guess there must have been a lot of similar customers, because now they take all the coupons & app discount codes.

 

[marko]

Then I found this today via CNN:

Minneapolis (CNN) — The resilient consumer has kept the US economic engine running, but it’s coming at a big cost: Americans are piling up record credit card balances, and more and more are falling behind on those payments.

During the third quarter, credit card balances hit a fresh high of $1.08 trillion, rising $48 billion from the prior quarter and leaping by a record $148 billion from the year before, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit released Tuesday.

The year-over-year increase is the largest since the New York Fed started tracking that data in 1999.

Household debt increased 1.3% to $17.29 trillion in the third quarter.

However, a growing number of households are having difficulty wrangling that debt, which is increasingly more costly amid an environment of painfully persistent inflation and high interest rates.

The latest data also showed that the rate of households becoming delinquent or entering serious delinquency (behind by 90 days or more) on their credit cards was the highest since the end of 2011. [ end ]

Just sounds like things are going in the wrong direction.

 

[foxfirev5]

Yeah, eventually it will all catch up. Humans have an unbelievable ability to rationalize everything.

 

[MichaelB]

Then I found this today via CNN:

Minneapolis (CNN) — The resilient consumer has kept the US economic engine running, but it’s coming at a big cost: Americans are piling up record credit card balances, and more and more are falling behind on those payments.

During the third quarter, credit card balances hit a fresh high of $1.08 trillion, rising $48 billion from the prior quarter and leaping by a record $148 billion from the year before, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit released Tuesday.

The year-over-year increase is the largest since the New York Fed started tracking that data in 1999.

Household debt increased 1.3% to $17.29 trillion in the third quarter.

However, a growing number of households are having difficulty wrangling that debt, which is increasingly more costly amid an environment of painfully persistent inflation and high interest rates.

The latest data also showed that the rate of households becoming delinquent or entering serious delinquency (behind by 90 days or more) on their credit cards was the highest since the end of 2011. [ end ]

Just sounds like things are going in the wrong direction.

I love that report, it has so much data. The 3Q ‘23 report can be found here

It’s counterintuitive, but increased debt is a positive sign. People take on more auto and credit card debt when they have a positive view of the future and save more when they fear bad times ahead.

Delinquencies have ticked up a bit but are still below pre-pandemic levels, and credit scores are holding, which means low credit borrowers are not increasing their share of new credit.

 

[foxfirev5]

...Delinquencies have ticked up a bit but are still below pre-pandemic levels, and credit scores are holding, which means low credit borrowers are not increasing their share of new credit.

Possibly because they can't borrow anymore

 

[marko]

It’s counterintuitive, but increased debt is a positive sign. People take on more auto and credit card debt when they have a positive view of the future and save more when they fear bad times ahead

I hope you're right. I tend to be more cynical and view the typical consumer having a " worry about tomorrow, tomorrow and live for today" mindset.