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Morning Brief: Consumer confidence dropping in August might be the worse of it

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Myles Udland breaks down Wednesday’s Morning Brief, which details that the decline in consumer confidence could be the worse of the economic data dropping as the economy continues to recover and braces for acceleration as the shopping season approaches.

Video Transcript

BRIAN SOZZI: Now my favorite part of the morning, the dive into the Morning Brief Newsletter, written by our very own Myles Udland. And Myles, you're still staying on all things economy here?

MYLES UDLAND: Yeah, I mean yesterday as we were doing this show we saw the Consumer Confidence Index out of the Conference Board hit the tape and that was another disappointment. And we saw a disappointment on consumer sentiment from the University of Michigan at the end of last week. But I thought what was notable about those pieces of data is as this data was rolling out, as we were talking about another miss on the state of the consumer, you and I Brian were talking to Joe Song, economist over at Bank of America. And basically, the work that Joe and his team on the economics group over at Bank of America were looking at and suggesting that the worst of the data is kind of behind us. There was no doubt a swoon in how consumers feel about the economy, no doubt there's been a flatlining in activity measures.

You know, we cite in today's report the work from the team over at Jefferies and Aneta Markowska on their activity indicator. Oxford Economics, and Greg Daco, they've had their activity indicator for some time. And it all sort of shows versions of the same thing, which is a flattening of where the economy is headed over the summer. But that is a very different proposition than an economy that's totally rolling over. That's a lot different than consumer confidence falling to you know, in the case of the University of Michigan report, falling to the lowest since the pandemic began.

So we're seeing a little bit of incongruity perhaps in the severity of that consumer confidence data when coupled with overall activity but what we've ultimately worked through, at least in the view of most of the economists and strategists we've talked to, we've worked through just a soft patch that kind of netted out as a flat patch for the economy, an economy still in recovery. And there seems to be, Brian, some enthusiasm, some optimism around a reacceleration of the economy as we get into the holiday shopping season and get into to the second or into the final quarter this year.

BRIAN SOZZI: Yeah, you made a good point there, Myles. Look, we just had Truist market strategist Keith Lerner on, and he's remaining bullish and really asked him why it is in fact, the case. And to your point, Myles, it looks as though investors are just looking beyond this soft patch in data and looking for brighter days in October, November and into year-end, dare I'd even say the first part of 2022.

MYLES UDLAND: Yeah, and I think, look, something that we discussed on the show yesterday and didn't come up in the Morning Brief but within that Jefferies report, you know, they broke down activity and they broke down traffic, foot traffic to various establishments. And one of them was consumer discretionary. So basically malls, right, malls and shopping centers. You know, traffic in Florida plummeted in August but traffic in New York and California remained kind of steady.

And so there's an unevenness as well to this to how the spread of the Delta variant is impacting the economy. There's an unevenness to this recovery. And there really has been, right, the whole way through.

And when we come back to how does the stock market think about it? Well, the stock market is prepared to sort of, I register, I see that this is happening, but I'm not going to worry about it in the aggregate, right? Maybe airlines are less attractive, maybe cruise lines I have more questions about, so on and so forth, you can do it however you'd like as an investor.

But ultimately, in the end, we have seen in the aggregate investors view the economic recovery as one that remains intact, remains durable, remains supported also, right? Remember we're still awaiting potential passage of an infrastructure bill. We still have a budget to get through. We still have some fiscal impulse that could further support this recovery. And I think the market is going to view the proceedings that way certainly until further notice.