April 30, 2017
This Just In
  • Emerald Expositions Events Inc. stock is set to start trading on the New York Stock Exchange April 28, 2017.
  • The offering will trade under the symbol EEX and is expected to close May 3.
  • The initial public offering price on 15.5 million shares of common stock will be $17 per share.
  • The architect for Messe Frankfurt’s new Hall 5 has been selected. Gruber + Kleine-Kraneburg will design the building, which opens in 2022.
  • The design will mirror the current two-story Hall 5, but with a column-free first level. Work begins when the Hall 6 renovation is finished.
  • The American Association of Sleep Technologists (AAST) signed with SmithBucklin to provide full-service association management services.
  • Abigail Lynn will serve as Executive Director for AAST, which will move its headquarters to SmithBucklin’s Chicago office on July 1.
  • The Albany Capital Center in upstate New York opened in March with 60+ events on the books for 2017. The overall project cost $78 million.
  • The new center, which is managed by SMG, has approximately 31,700 sf of meeting/exhibit space that can accommodate up to 5,000 people.

Weak Consumer Spending and Investing Are Sore Spots in the Economy

Darlene Gudea
, Publisher
June 1, 2015



Oceanside, CA - Like a mystery novel, everyone is searching for clues of why the consumer has gone missing. Since the Fourth Quarter of 2014, economists and analysts expected the consumer to lift the U.S. economic recovery to a much higher level by Q2 of 2015. “With job growth averaging over 200,000 in 14 out of the last 15 months, hourly wages picking up, and dramatically lower gas prices, it was assumed the consumer would have a banner year in 2015,” said Frank Chow, chief economist for Trade Show Executive Media Group.  “Instead, the consumer has faded from the scene:  recent data shows little evidence of growth in spending, borrowing or investing,” he pointed out.

The April retail sales report compounded concerns about the consumer. With expectations of a strong bounce-back from last year’s winter storms, Chow said retail sales were astonishingly flat, registering no change from the prior month. Not only were auto and gas sales weak, but core categories such as department stores, electronics and appliances also fell sharply. “More ominous is the trend: Q1 reflected the first quarterly decline in three years,” said Chow. “Three of the past five months have been in the red and April was flat.”

Moreover, since January, year-over-year growth in retail sales has been decelerating, with April increasing only 0.9%, the slowest annual growth in nearly six years. Chow said part of the reason for the weak growth is the big drop in gas prices, but he pointed out that those savings are not being spent elsewhere.  Consumers are still paying down debt instead of borrowing, and credit card balances declined almost 3% in Q1, according to data from the New York Fed.

Chow outlined additional stats on overall economic performance to provide more context:

  • Initial estimates for Q1 GDP came in at a paltry 0.2%. “GDP is certain to be revised to an even lower reading based on the latest trade and inventory data,” he said.
  • Industrial production and capacity utilization both dropped in April, declining five and six straight months respectively.
  • Manufacturing growth, buffeted by the strong dollar and a retracting energy industry, seems stalled for now.
  • Homebuilder confidence dipped in May, as a report from NAHB/Wells Fargo showed measures of sales and buyer traffic dropped.

More Consumer Skepticism Ahead?

The weak general economy is bound to eventually cause consumers’ outlook to become more skeptical. On cue, the University of Michigan (U of M) Consumer Sentiment report fell from 95.9 in April to 88.6 in May — largest drop since December 2012. U of M Chief Economist Richard Curtin commented that consumers “became increasingly convinced that there would be no quick and robust rebound following the dismal 1st Quarter.” The decline was widespread among all ages, incomes and regions. The Bloomberg Consumer Comfort Index likewise had a similar drop in May.

“Only the labor market appears to be performing well, as 223,000 new jobs were created in April,” said Chow. Surprisingly, most of the new jobs were higher-paying professional and construction positions. At the same time, the March jobs report was revised down sharply to 85,000 from an initial 126,000 rise. “Amidst all the other disappointing data, the April jobs number sticks out like a sore thumb,” said Chow. “This has caused some economists to question the validity of the payroll calculations and predict a large downward revision.”

While analysts don’t have a consensus explanation for the lack of consumer spending, Chow offered a list of the most plausible:

  • Healthcare spending and taxes are much higher than anticipated.
  • Gas savings are viewed as temporary and ending soon.
  • Wage and income growth is still muted, especially for middle- to lower-income households.
  • The fallout in the energy sector from plummeting oil prices is more widespread than realized.
  • The rising uncertainty about the future is prompting consumers to save.

The Broader Economy Could Be Impacted by the ‘Consumer Recession’

While all these factors are likely contributing to the consumer malaise, whether it will last and spread to the broader economy remains to be seen. Some economists say the U.S. may already be in a consumer recession while the rest of the economy remains steady. This theory may sound puzzling, but a recent labor study by the Kansas City Fed gives it more credibility, said Chow. The study found job growth for mid- to highly skilled workers have been strong the past three years but floundering for low-skilled workers — the reverse from the early recovery years, Chow noted.

Yet the JOLTS data tells us that there are not enough skilled applicants — a gap of 5 million workers. Many more millions of those low-skilled workers have dropped out of the labor force or work part-time. “As a result, the payroll report paints a picture of companies creating plenty of jobs, but masks the difficulty for the majority of workers to obtain a job or a higher-paying job,” Chow said.  He noted that workers are also facing significantly higher health care costs and taxes from the Affordable Care Act, while wage gains have stayed muted this year. “Together with the lack of skills, this may provide a better insight into what is happening with workers and spending,” Chow said.

Will spending revive in the next two months? Most Wall Street estimates of Q2 GDP growth are around 2.5%, which implies a continued healthy job growth and a snap back in spending for May and June, said Chow. On the other hand, the most accurate Q1 forecaster was the Atlanta Fed, whose most recent projection for Q2 is a meager 0.7% growth. This implies spending will languish while job growth will start to slow.

“Either way, it seems almost certain that the Federal Reserve will refrain from hiking interest rates in June, but more likely in September,” said Chow. However, if the consumer doesn’t show up soon, then expect interest rates to remain unchanged until 2016. Chow said we should get clearer direction in July when data for Q2 is reported.