A worker stocks the shelves at a Walmart store on January 24, 2023 in Miami, Florida.
Joe Raedle | Getty Images News | Getty Images
If you think the economy is confusing right now, consider how baffling it must look to Home Depot and Walmart.
Last week, the two big retailers sent cautious signals about the health of the U.S. consumer. In a nutshell: Walmart said U.S. consumer spending started the year strong, but that it expect households to back off through the year, producing weak fiscal-year 2024 U.S. sales growth of 2 to 2.5 percent. Home Depot said consumer spending is holding up, but that it expects a flat sales-growth year overall, with declining profits.
Indeed, the latest inflation read from last Friday’s core personal consumption expenditures index was hotter than expected, showing a consumer that continues to defy expectations. Friday’s PCE showed consumer spending rose more than expected as prices increased, jumping 1.8% for the month compared to the estimate of 1.4%.
From the big-box retail earnings to declining hopes that disinflation would be a straight line down in 2023, the latest news from the markets and economy highlight just how hard a job the Federal Reserve has in cooling the economy without causing a recession.
“The consumer is resilient right now,” said CFRA Research retail analyst Arun Sundaram. “The consumer is still spending, not as much as a year or two ago, but they haven’t quite stopped.”
Consumer, retail stocks post a very bad week
The 2023 outlook from these two key consumer companies sent the Dow and S&P 500 down on Tuesday, and the market’s recent losing streak continued through the end of the week. It wasn’t a good week for the retail sector or consumer stocks, either. The SPDR S&P Retail ETF is up 9% for the year, but was down roughly 7% last week, its worst five-day stretch since July 2022. Consumer discretionary stocks turned in the worst performance of any S&P 500 sector, down close to 4.5% for the week.
Getting a good read on…
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