Economic Data Looking Incrementally Negative: Amazon Announces Surprise Spring Sale
Even a month or two ago, things were looking incrementally rosier. There has been a set of economic data and events released recently that seems to point to a "flat y/y 2024" instead of an incrementally positive 2024, compared to prior year.
A few datapoints as to why:
* First, quite suddenly Amazon has announced a "Big Spring Sale" prior to the end of March, indicating to me that traffic is off and the company needs help hitting its quarterly targets. (long-term, I do expect them to have a sale event in place each quarter, that they can dial up or down in intensity based on the need)
* The CEO of McDonald's indicates that lower-income people are eating more at home recently, which is putting downward pressure on them. Essentially, fast food inflation is up 5.2% and grocery inflation is up 1%. In short, inflation is still with us.
* Census Bureau data indicated that online sales data slipped in February 0.1% month over month, while at the same time overall retail sales were up 0.6% month over month (even this retail sales gain was less than expected). Pointing to a slight uptick in store traffic (though not everywhere -- apparel -0.5% and health/personal care -0.3% were still down). Not all are down, though -- auto parts up 1.6% month/month.
As we move into further into spring, the hope is that apparel will rebound. March will be watched closely.
* The recent Producer Price Index rose 0.6% in February, much higher than expected, reflecting wholesale prices to manufacturers. Where do you think these costs are headed next? The bulk of the rise in prices is due to the cost of goods and energy.
All of this data is bad news for interest rate watchers. And who is one of the biggest watchers of interest rates? The venture-capitalists!
Why? Well, if Limited Partners who invest in venture funds can invest in the safest investments, treasuries, and get 5+% on their money taking almost zero risk, then the need to invest more in "alternatives" to boost their portfolios becomes less.
Retailers and brands are also huge interest rate watchers given how closely mortgage and lending rates track the Fed's interest rates. Entire sectors of the economy depending on consumers moving into new homes.
TL;DR --
Even a few months ago, the prognosis for the year was never a runaway success. It always seemed to be just incrementally more positive. Downward retail revisions, slightly more muted growth, weather weirdness, more stubborn inflation, and predicted higher-for-longer interest rates are all incrementally negative signs.
Perhaps the overall year outlook could rebound, but the consumer and the economy will have to overcome a few more headwinds than expected.
One of the best indicators to me just arrived yesterday: Amazon's new Spring Sale, coincident with this data. After all, Amazon employs more PhD economists than anyone but the Federal Reserve itself.
