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Delta Blues


A key measure of consumer confidence slipped badly in August, and the U.S. economy added just 235,000 jobs as the coronavirus pandemic, specifically the Delta variant, continued to plague the country.

The Conference Board reported that its Consumer Confidence Index fell to 113.8 in August from a downwardly revised reading of 125.1 in July.

“Consumer confidence retreated in August to its lowest level since February 2021,” Lynn Franco, senior director of economic indicators at The Conference Board, stated in a press release. “Concerns about the Delta variant — and, to a lesser degree, rising gas and food prices — resulted in a less-favorable view of current economic conditions and short-term growth prospects. Spending intentions for homes, autos and major appliances all cooled somewhat; however, the percentage of consumers intending to take a vacation in the next six months continued to climb. While the resurgence of Covid-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead.”

Another important measure of the public’s mood was also sharply lower in August. The University of Michigan reported that its Consumer Sentiment Index fell from 81.2 in July to 70.3.

“There was no lessening in late August in the extent of the collapse in consumer sentiment recorded in the first half of the month,” Richard Curtin, chief economist of the university’s Surveys of Consumers, stated in a press release. “The Consumer Sentiment Index fell by 13.4 percent from July, recording the least-favorable economic prospects in more than a decade. The sentiment index has only recorded larger losses in six other monthly surveys since 1978.

“Personal financial prospects continued to worsen due to smaller income gains amid higher inflationary trends,” Curtin added. “Consumers’ extreme reactions were due to the surging Delta variant, higher inflation, slower wage growth, and smaller declines in unemployment. The extraordinary falloff in sentiment also reflects an emotional response, from dashed hopes that the pandemic would soon end and lives could return to normal.”

However, Curtin added, “The August collapse of confidence does not imply an imminent downturn in the economy.”

The unemployment rate fell from 5.4 percent to 5.2 percent in August, disappointing economists who were looking for a gain of about 700,000. Fears of the Delta variant and a continued worker shortage were cited as reasons for the shortfall.

“The labor market recovery hit the brakes this month with a dramatic slowdown in all industries,” Daniel Zhao, senior economist at jobs site Glassdoor, told CNBC. “Ultimately, the Delta variant wave is a harsh reminder that the pandemic is still in the driver’s seat, and it controls our economic future.”


Ian Shepherdson, chief economist of Pantheon Macroeconomics, told USA Today: “Before Delta, we were looking for [1 million-plus monthly] payroll gains in the fall, but that’s now going to be a real struggle.”

The U.S. Department of Labor reported that employment in professional and business services increased by 74,000 in August, and the transportation and warehousing category added 53,000 jobs. A total of 37,000 jobs were added in manufacturing. However, employment in retail trade fell by 29,000 jobs during the month, and employment in the leisure and hospitality category was unchanged from July.

Ken Hey, CEO of Sunstream boat lifts in Kent, Wash., says he believes the U.S. economy is sound.

“With the exception of the brief, yet dramatic market downturn in March 2020, this has been the longest-running bull market in recent history,” Hey says. “We believe fundamentals are strong, the U.S. economy is vibrant and the job market is healthy.”

Hey considers boat sales, waterfront home sales volume and increasing real estate values as prime leading indicators for his company.

“As a high-end boat lift company, we look for markets with customer boat values over $80,000 and waterfront homes over $1 million,” Hey says. “In the last few years, the vast majority of the waterfront and lake markets have reached this level. We also see a correlation with the stock market. Capital gains dollars love boats.”

He says the marine industry’s best long-term leading indicators are the number and age of new boaters entering the market, and the extension of the age of boaters sticking with boating.

“With demand outstripping supply, the primary headwinds for the marine industry are a shortage of qualified labor, as well as shortage of materials,” he says. “This makes a counterintuitive effect whereby even though a more fully employed economy creates more demand with more jobs, it reduces the production capacity of the industry.”

During the pandemic, he says, his company shifted to a hybrid model that combines in-person and remote work. It has helped Sunstream to improve work efficiency.

“A cross-country meeting that used to take a team member out for three days now takes an hour or two,” he says. “Covid has changed the business culture forever, with video meetings not only being acceptable, but preferred. For those who have excelled in remote working, we have seen a surge in productivity with fewer distractions, higher job satisfaction with greater flexibility and work-life balance, and an increase in work hours due to no commute time,”

Hey called the company’s recent growth “explosive,” adding that “we have never experienced such sales growth in our 25-year history, even when we made the Inc. 500 list.”

Looking ahead to 2022, Hey expects consumer demand for boats to remain strong, and the stock market to remain bullish. However, “There is still plenty of cold water being thrown at the marine industry as we approach this winter. The high inflation of materials and logistics are causing much of the industry to raise prices 10 percent or more, the labor and materials shortages will continue to slow production, and many manufacturers are sold out for next summer, which curbs consumer excitement and impulse buying. Since we’re in the business of selling boat lift and cover system products that enable consumers to keep their boats looking new and fresh for longer, this is both a pro and a con for our business.

“With demand outstripping production, we can also expect significant inflation and volume increases in the used boat market for the next year,” he says.

The U.S. Department of Commerce reported that consumer spending rose by a modest 0.3 percent in July, down from a 1.1 percent rise in June. Personal incomes rose 1.1 percent, helped by the new child-care tax credit.

Inflation rose. The Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, climbed 0.4 percent in July, and the rate of inflation for the 12-month period that ended in July was 4.2 percent, the highest since 1991.

The Conference Board reported that its Leading Economic Index increased by 0.9 percent in July, to 116.0, after increases of 0.5 percent in June and 1.2 percent in May.

“The U.S. LEI registered another large gain in July, with all components contributing positively,” Ataman Ozyildirim, senior director of economic research at The Conference Board, stated in a press release. “The Leading Index’s overall upward trend, which started with the end of the pandemic-induced recession in April 2020, is consistent with strong economic growth in the second half of the year. While the delta variant and/or rising inflation fears could create headwinds for the U.S. economy in the near term, we expect real GDP growth for 2021 to reach 6.0 percent year over year before easing to a still-robust 4.0 percent growth rate for 2022.”

The mood among the nation’s small businesses darkened in July. The National Federation of Independent Business reported that its Small Business Optimism Index fell 2.8 points, to 99.7.

“Small business owners are losing confidence in the strength of the economy and expect a slowdown in job creation,” NFIB chief economist Bill Dunkelberg stated in a press release. “As owners look for qualified workers, they are also reporting that supply-chain disruptions are having an impact on their businesses. Ultimately, owners could sell more if they could acquire more supplies and inventories from their supply chains.”

Forty-nine percent of business owners in the NFIB reported job openings that they could not fill in July. That is a 48-year high.

Confidence among the country’s home builders declined to a 13-month low in August. The National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market Index fell five points, to 75.

“Buyer traffic has fallen to its lowest reading since July 2020 as some prospective buyers are experiencing sticker shock due to higher construction costs,” NAHB chairman Chuck Fowke stated in a press release. “Policy-makers need to find long-term solutions to supply-chain issues.”

NAHB chief economist Robert Dietz added: “While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales. While these supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions.”

The HMI index that gauges current sales conditions fell five points in August, to 81; the component that measures the traffic of prospective buyers also posted a five-point decline, to 60. The gauge that charts sales expectations in the next six months held steady, at 81.

The Commerce Department reported that new-home sales rebounded in July. They rose 1 percent, to a seasonally adjusted annual rate of 708,000, after having fallen for three months in a row.

Existing-home sales also rose. The National Association of Realtors reported that sales rose 2 percent in July, to a seasonally adjusted annual rate of 5.99 million. It was the second month in a row of increases.

“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” Lawrence Yun, the NAR’s chief economist, stated in a press release. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”

The median existing-home price in July was $359,900, up 17.8 percent from the previous July, as every region of the country saw prices climb. According to the NAR, this development marks 113 straight months of year-over-year gains.

“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” Yun says.



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