Consumer Sentiments Decline Since Election

By | June 12, 2017

Welcome to FTR’s “Monday Morning Coffee “ blog. The following article is designed to keep busy executives up to date with the latest economic data releases. Released every Monday, this blog promises to keep our clientele updated with the latest weekly economic news and developments, highlighting its impact on the transportation, freight, and equipment markets. Hopefully, this will be an informative addition to the fine body of work associated with FTR.


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The pollsters got it wrong, again.  Britain woke up to a political situation, that had been given only a 4% to 7% chance, a hung Parliament with the Tories as the largest party. Final results showed the Conservative’s strategy of calling early elections backfired, with the party garnering only 319 seats, seven short of a majority. Labor, by contrast, won 261 seats. The future couldn’t be more unclear. Prime Minister May’s position looks insecure and we wouldn’t be surprised if she offered her resignation in the following days. What does this mean for Britain’s economy and Brexit?  The chances of a “hard-Brexit” have fallen significantly. What it means to Britain’s economy is hard to say.  The Sterling fell at the sharpest rate in eight months. What benefit Britain might gain with a lower currency is now offset by political uncertainty, just days before Brexit negotiations were due to begin.

The effect of Britain’s election and the testimony of ex-FBI director James Comey has on financial markets were minimal. Movements in financial markets outside of the U.K. were subdued. A selloff of technology stocks spoiled an otherwise buoyant day in the U.S. market. The tech-heavy Nasdaq dropped 2.4%, but the S&P slipped 0.1% on Friday, but the Dow Jones rose 0.4%. The Stoxx Europe 600 added 0.3% on Friday.

It was a quiet week in the U.S. for economic data. Both factory orders and the ISM non-manufacturing index took a step backwards. The ISM fell from 57.5 in April to a still lofty 56.9 in May. Sentiment indexes are falling back from the high levels reached just after the election, as the probability of any stimulus measures and tax reforms are delayed or sidelined. Factory orders fell 0.2% in April, the first decline since last November. Capital goods orders edged up 0.1%, continuing a somewhat flat trajectory the last three months. Although remaining positive on trend, factory conditions have slowed a little the last couple of months. Autos are topped out, but non-auto manufacturing is making positive but modest gains.

Latest Data

The U.S. Economy:

Factory orders took a small step backwards in April, falling 0.2%, the first decline since November.  March orders were upwardly revised to a 1.0% increase. Nondurable goods orders increased 0.4%, while durable goods orders fell 0.8% in April. Core capital goods orders and shipments increased 0.1%.  Core capital goods orders are up 3% from a year earlier. Factory inventories edged up 0.1%, with an inventory-to-sales ratio of 1.38 months in April. The report shows that factory conditions are much improved from a year earlier, although momentum has slowed down. Factory employment fell by 1,000 jobs in May and regional Fed surveys showed stabilization of factory conditions in April and May, but not a lot of growth. Sentiment is fading back in line with actual output, which is positive, but still quite modest. Uncertainty is rising as hopes for healthcare, tax reform and increased infrastructure, issues that drove up sentiment after the election, are fading. In a sign that could spell trouble, bank lending to commercial and industrial clients has slowed significantly since last fall. The factor does not seem a tightening of credit, but slower demand. The outlook for the factory sector is still positive, but activity will continue to be modest.

The ISM non-manufacturing index softened some in May, but continues at a high level. The index fell from 57.5 in April to 56.9.  Details were soft, as orders dropped from 63.2 to 57.7, leaving it below the first quarter average of 59.6, but in line with the 57.5 average of 2016. The business activity index dropped from 62.4 to 60.7. New export orders fell 11 points to 54.5.  Employment, though, increased from 51.4 to 57.8. The index has softened lately but there is little reason to be concerned. Sentiment index have fallen from post-election peaks as businesses reassess their expectations for stimulus measures this year. Most economists are lowering forecasts to include that fact that no stimulus measures will emerge from Congress this year and very likely not next year. Still, consumer fundamentals are solid, even as we enter a full employment economy. Wages are starting to rise, albeit very slowly compared to past full employment periods. Car sales have topped out and although consumers will continue to spend, there is some downside risk that they may be slower than expected in non-auto sales. The outlook for the economy remains fairly solid but is does appear that growth may be slower than expected.


The global economy is on course this year for the fastest growth in six years as a rebound in trade helps offset slower growth in the U.S. The Organization for Economic Cooperation and Development (OECD) projects the global economy will grow 3.5% this year and edge up to 3.6% next year. The OECD saw greater global growth even as it downgraded the U.S. The OECD projected U.S. growth to be 2.1% in 2017 and 2.4% next year, down from a forecast of 2.4% and 2.8% in March. The downgrade was attributed to delays in tax cuts and stimulus efforts under the new administration. The OECD did nudged up its China forecast tp 6.6% this year and 6.4% in 2018. Stronger Chines growth is supporting strong imports and help fuel intra-Asian trade. As a result trade volumes are projected to grow 4.6% this year, about twice last year’s growth. There are risks, OECD warned that the difference between monetary policy rates between different central banks could lead to market volatility and China’s debt could also develop into a major problem.

Important Data Releases This Week

May NFIB small business survey will be released on Tuesday, June 13 at 6:00 AM EDT. Small business optimism dipped in April, but remains at a high level. The index dipped from 104.7 to 104.5.  We expect a small decline in May to 104.1. Expectations for stimulus have faded, but optimism still remains at a decent level.

May PPI index will be released on Tuesday, June 13 at 8:30 AM EDT. We look for index to increase 0.1%, following the 0.5% jump in April. Energy will be neutral, but nonfuel inputs are running a trend-like 0.2%.

May CPI index will be released on Wednesday, June 14 at 8:30 AM EDT. We look for index to rise 0.1% in May following the 0.2% rise in April. Energy prices didn’t move much in May, but wages are starting to exert upward pressure on the cost of goods.

May retail sales will be released on Wednesday, June 14 at 8:30 AM EDT. We look for retail sales to rise 0.2% in May after the 0.4% surge in April. Auto sales will be flat and non-auto sales will see some upward swing in activity. The consumer probably took a small break in May after the spending surge in April.

April business inventories will be released on Wednesday, June 14 at 10:00 AM EDT. We project that business inventories rose 0.1% in April after the 0.2% increase in March and the I/S ratio will remain unchanged.

May industrial production will be released on Thursday, June 15 at 9:15 AM EDT. We look for industrial production to be flat in May and also manufacturing after both indexes posted a strong 1% gain in April.

May housing starts will be released on Friday, June 16 at 8:30 AM EDT. We expect housing starts to regain some of April’s 2.6% decline. Housing activity has been slow so far this year and although fundamentals are falling into place for better activity, actual starts have lagged.  The single-family sector is still expected to post gains, while the multifamily sector is topped out.

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2 thoughts on “Consumer Sentiments Decline Since Election

  1.'Michael Absworthy

    Every indicator you cite is negative as you observe in your article. How are “Trends Remaining Positive” as the title of your article states? Can we expect more free money from the Fed?

    1.'Michael Starks Post author


      Yes, there was an error when posting and the wrong title was used. I’m updating now. Although the indicators are negative, overall the 2% growth trendline seems to be holding. Not exactly positive news.

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