Three “Data” items today:
#1: Google search volumes related to the pandemic, both in the US and around the world. The number of online searches has varied considerably over the last 2 years as the illness has ebbed and flowed. We associate declining search volumes with improving consumer/worker confidence and increasing search interest with declining confidence.
The Google Trends chart below shows US search volumes over the last 2 years. The volatility of the time series is pretty amazing (at least to our eyes). Pandemic-related search volumes have varied by as much as 3x on three different occasions in the last 24 months.
The important thing to know now is that pandemic-related searches are rising in the US once again, as noted in the rightmost part of the graph. It is impossible to know with certainty how the next few months will progress, but we also noted in the middle of this chart that last winter saw persistently high search interest.
Now, here are worldwide pandemic-related Google search volumes. It’s a very different looking chart. Search interest has been more stable and there were 2 peaks: one at the onset of the pandemic and one at the height of the delta variant wave. More recently, search volumes had been declining with a low of 41 in October/November. The latest variant is, however, garnering significant attention with search volumes up +43 percent since then.
Takeaway: we think Google search volumes are a reasonable proxy for societal concern about the pandemic, and this measure says the latest variant is beginning to have an impact. It is still too early to tell how all this will play out. We can take some comfort in the fact that current search volumes (both US and global) are still below much of the last 2 years. In western economies, that should bode well for Holiday spending. We will keep an eye on this data in coming weeks and report back as it develops.
#2: US credit card balances as a measure of domestic consumer confidence. It is a myth that American consumers borrow more on their credit cards when they fear for their jobs or have concerns about the domestic economy. The historical data is clear on that point. Rather, they borrow more when they think their job is secure and their near-term economic future seems bright.
This chart shows US credit card balances from the start of 2020 until the end of November 2021 (latest data available). The vast majority of the decline from the pre-pandemic peak ($862 billion) to the February 2021 trough ($742 bn) was due to debt paydown rather than writeoffs, which were far lower than expected due to fiscal stimulus. Since those lows earlier this year, Americans have added $53 billion to their credit card balances. That is $161/person for every American, whether they own a credit card or not.
Takeaway: US credit card balances are rising at a healthy clip once again and, unlike 2020 (noted in the graph) they are increasing as we go into the last stages of Holiday 2021. Moreover, we are still far below ($67 bn) the balance levels of March 2020 so there is room for further growth. Again, this is not a function of Americans borrowing to make up for lost income. It is a definite sign of consumer confidence and, to our thinking, more reflective of that factor than recent surveys.
#3: Last night we mentioned the Atlanta Fed’s GDPNow model and its remarkable +9.7 percent forecast for Q4 2021 real US economic growth; here is some more detail of how it is getting to that number.
This table shows the model’s various inputs as they were reported and what effect they had on the estimate. When we first saw the original estimate of +6.6 percent in late October, we were sure it would quickly be revised lower. Since then, however, the model’s estimates have generally increased. Construction spending, industrial production, and retail sales data seem to have the most pronounced positive effects.
Takeaway: even if one assumes the Atlanta Fed model is off by 50 percent, that still makes for a Q4 real GDP growth rate of almost 5 percent. This is much better than Q2’s +2.1 percent and gives us confidence that US corporate earnings can easily beat Wall Street’s expectations this quarter. We continue to believe that this one factor (earnings much better than expected) is the lynchpin for further US equity market gains.
Atlanta Fed GDPNow Model: https://www.atlantafed.org/cqer/research/gdpnow?panel=4