Economic Doomers Just Dived Into the Shallow End of the Pool

Summary:

Despite predictions of economic downturns, recent trends reveal a significant shift in consumer spending habits that highlight the resilience of the U.S. economy. Pool Corp’s recent announcement of lowered earnings due to reduced demand for new pool construction sparked concerns, reflected in a notable decline in its stock price and related home improvement stocks like Home Depot and Lowe’s. However, this dip in goods-related spending contrasts with a surge in spending on experiences. Carnival Corp’s raised earnings forecast, driven by record demand for cruises, alongside bullish outlooks from companies like Live Nation Entertainment, underscores a shift towards services such as travel, leisure, and dining out.

Economic analysts note that this trend indicates a broader change rather than a collapse in consumer financial health. While reports like the Commerce Department’s retail sales figures show modest growth in goods, the real story lies in the booming services sector. Air travel, for instance, has seen an unprecedented rise, marking a robust indicator of discretionary spending. Despite higher consumer prices and interest rates, American households are leveraging their financial resources effectively. With household net worth at record highs and debt levels as a percentage of disposable income declining, the doomers’ outlook appears overly pessimistic. The nuanced reality is that consumers are reallocating their spending, fueling growth in sectors that enhance quality of life.

Our take (from the Straight to Smart newsletter):

No catalyst for near term rate cuts

Article Excerpt:

After being so consistently wrong in recent years about how the US economy and households would perform coming out of the pandemic, doomsayers should have learned their lesson. But there they were in full force after Pool Corp. said late Monday that it was lowering its earnings outlook because households aren’t installing backyard swimming pools as they once did. Here’s how Pool put it:

“The most recent pool permit data suggests persistently weak demand for new pool construction, and with the peak selling season almost complete, we now believe that new pool construction activity could be down 15% to 20% for the year with remodel activity down as much as 15%.”

Click to read original Bloomberg article (subscription may be required):
Economic Doomers Just Dived Into the Shallow End of the Pool

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