A riddle wrapped in a mystery, a Cheetos economy, the Olympics, and Kiters.
“It is a riddle wrapped in a mystery inside an enigma.”
That is a quote by Winston Churchill when he tried to describe Russia in 1939.
It’s also how I would describe the U.S. economy this year.
As I mentioned last week, Fed Chair Jerome Powell gave the market optimism the last time he spoke that the Fed might think about lowering rates, prompting financial markets to price in a 0.25% rate cut in September.
The economy must continue cooling for them to lower rates.
Well, the opposite of cooling is retail spending increasing by 0.4% (excluding auto sales).
We exclude auto sales this time around because of a disastrous failure of a widely used dealership software that essentially stopped the sale of cars for about a week, and the effects are still ongoing.
With this economy, I find very few people who can make heads or tails of it. Conversation points revolve around the middle class still spending and retiring boomers spending their retirement money. However, the minimum wage worker is way more impacted by the 20+% increase in food prices over the last three years.
Other theories include three economies: west coast, east coast, and all points between.
Back to retail sales.
0.4% is a pretty good monthly jump. Gasoline declined, bringing the retail sales number down. If you take out gasoline, retail sales jumped 0.8% in a month. That’s a big jump.
At the same time, unemployment claims keep ticking up, at 243,000 this week.
1.9 million folks are on unemployment, the highest since November, 2021.
And yet, retail sales are up.
“It is a riddle wrapped in a mystery inside an enigma.”
Cheetos - the latest economic indicator
Frito Lay North America owns Cheetos, and sales volumes fell 4% when you compare Q2 2024 to Q2 2023.
Their Q2 ended June 15.
Due to higher prices, revenue was down only 0.5% for Frito Lay and up 1% for beverages. That’s because beverages were down 3% quarter over quarter, and price increases made up the difference.
From PepsiCo: “The impacts of persistent inflationary pressures and higher borrowing costs over the last few years have resulted in tighter household financial conditions. Consumers have become more value-conscious with spending patterns and preferences across brands, packages, and channels.”
It Kind of makes you look back at the previous section of this Report.
Reality belies the beliefs of numerous economists. It’s a riddle…
Conagra’s snack division also experienced decreases, notably lower income buyers pulling back.
Stock prices of both companies are down by over 8% in the last 12 months. Right now, silicone chips are way better than potato chips.
Olympics Start Friday, July 26!!
Actually, not really. They start on the 24th. What??!!
Friday is the opening ceremony, but soccer (football everywhere else) and rugby sevens start on Wednesday.
What is the fastest sport in the Summer Olympics?
Could it be cycling? Track & Field? Platform Diving?
Nope. Kitesurfing.
Kiters – that’s what they are called – clock speeds of up to 50 mph in competitions called Formula Kite in an 11-minute race.
The favorites are Lauraine Nolot, France, 25, and Max Maeder, Singapore, 17.
Kiters have a completely different meaning in banking, and it’s not very positive.
Team USA has almost 600 athletes in 32 sports. There’s even a local athlete from Claremont, California, competing in her first Olympics at the age of 28 in the 200M sprint. Find someone from your hometown, county, or state and follow their progress. There are many inspiring stories in these games, so look for them.
The best time to watch it is during lunchtime on the West Coast, which is primetime in France.
That would be 11 a.m. to 2 p.m. Pacific or 2 to 5 Eastern.
Just trying to keep everyone in the loop.
Coming Up This Week – Besides the Olympics, this week will have the first release of the second quarter GDP – Gross Domestic Product. It is expected to come in at 1.9%, up from the first quarter of 1.4%, so look for that. Also coming out is the Personal Consumption Expenditures index – the one the Fed watches. This is a key measurement of inflation and is forecast to come in at 2.5%, down from 2.6% the previous month. That’s a key number to look at this week, folks. If that’s above 2.5%, the chances of a rate cut get reduced. Keep an eye on it.
This week’s quote is all about attitude, and you have likely heard it before, but it’s worth repeating.
Whether you think you can or think you can’t, you’re right.
Henry Ford.
