As we near the end of one of two seasonal peaks to any given year that are crucial for US consumer spending and employment – right now (summer) and late fall/early winter (holidays) – it’s important to consider what will drive economic growth heading into this fall. To start, let’s assess the real-time state of the US economy using high-frequency data, which the Federal Reserve increasingly relies upon according to Chair Powell.
First, the New York Fed’s Weekly Economic Index (WEI), which aggregates daily/weekly indicators of economic activity, including everything from unemployment insurance claims and Federal tax receipts to retail sales, consumer confidence and gasoline sales. Good news here: despite slowing after the lift through the 4th of July holiday period, the WEI has since rebounded to a post-crisis high. It was just updated today, so that upward trend is likely due to the solid initial claims numbers out this morning.
Second, SafeGraph’s cellphone geolocation data – which tracks about 45 million cellphone locations in the US – shows foot traffic to businesses has also picked up of late, albeit slightly. As the charts below show, foot traffic has started to improve again in the aggregate, and for everywhere from counter service/sit down restaurants to bars/coffee and snack bars.
Third, Google Trend search volumes for “restaurant” and “bar” peaked in late June and had flattened out, but have had a slight pickup over the last week in line with the SafeGraph data. The same goes for queries for “beach” and “lake”. We view this as a leading indicator as people tend to google their plans before actually doing them. While there’s little interest in air travel-related queries as we continue to highlight in these notes, we suspect Americans are planning nearby getaways heading into the Labor Day holiday at the end of August/early September. That means road trips to beaches/lakes and dining/drinking at outside venues.
The upshot: end of Summer staycations/vacations should provide a boost to consumer spending and the broader economy just like what occurred around the 4th of July holiday. But what will help the economy to continue recovering once adults return to focusing on work and kids go back to school (either physically or remotely)?
Google Trends shows searches for “Buy a house” are at an all-time high going back to when the data was first collected in 2004:
A few points here:
- The COVID-19 Crisis has pulled housing demand forward for a host of reasons: low mortgage rates of course, but also Americans wanting additional space amid shutdowns and more controllable environments given social distancing needs, etc.
- The last time searches for “buy a house” peaked was in early 2012, towards the beginning of the last economic cycle. This early cycle setup appears to be playing out again not only because of low interest rates, but also the COVID-related issues we laid out.
- This high level of interest in buying new houses has positive ripple effects for both retail sales and demand for labor and contractors. Once Americans move into a new home, they typically purchase new furniture, durable goods and perhaps even renovate.
- In short, this is as classic an early-cycle setup as you’ll see. There are plenty of reasons to be concerned about the US economy. There always are at a bottom. But a turn in the housing market is typically one of the first signs of economic revival and has beneficial spill-over effects to other parts of the US economy.
Bottom line: consumer spending and activity over Summer 2020 will likely prove decent overall despite the circumstances, but look for a surge in housing demand to help kickstart the US economy over the balance of this year.