I need help understanding US consumers.<\/p>\n
Maybe I am increasingly out of touch because I can now afford a decent piece of steak versus the cheap London broil and boiled hot dogs that dominated my life from ages 5 to 25. Maybe because I spend any given week speaking to 976 CEOs and have been sucked into their reality of bottomless bank accounts.<\/p>\n
But I don’t think I am out of touch. In my head, I’m still the same starving 17-year-old golf caddy who slept in his car at the course a couple times a week just to catch the earliest “loop” in the hope of earning $40 in cash five hours later.<\/p>\n
But hey, maybe I’m deluding myself into thinking I am still that person.<\/p>\n
I bring this up as I am 100% confused by how Americans are reacting to $4 gas, higher energy bills, and all of this being passed onto them in other forms like delivery surcharges and fatter fast food checks.<\/p>\n
The reads on the consumer have been all over the map!<\/p>\n
The latest University of Michigan Consumer Sentiment Index showed that US consumer confidence this month has plummeted to a record low of 47.6.<\/p>\n
This represents a staggering 11% plunge from March and is the lowest reading in the survey’s 74-year history. It even fell below the levels seen during the 2008 financial crisis and the 1980s inflationary shock. The decline was broad-based across all age groups, income levels, and political parties.<\/p>\n
Dour consumer moods reflected the spike in gas prices related to the Iran war. Year-ahead inflation expectations increased to 4.8%, the largest one-month jump in a year.<\/p>\n
Goldman strategist Ronnie Walker came out this week with a warning on the consumer.<\/p>\n
“What originally appeared to be a solid year for consumer spending has quickly become more challenging. … We expect weak real consumption growth over the coming months,” Walker said.<\/p>\n
He added, “Gasoline prices have increased by nearly 40% since the war began, representing a roughly $140 billion annualized headwind to household incomes at current levels.” The firm’s strategist estimates that if Brent crude oil (BZ=F<\/a>) returns to $80 per barrel by year-end, this headwind would shrink to $60 billion annualized by the end of 2026.<\/p>\n “Higher gasoline prices disproportionately weigh on the spending of households in the lowest income quintile \u2014 who spend roughly four times as much on gasoline as a share of after-tax income compared with those in the top quintile \u2014 and spending on discretionary categories, such as restaurants,” he said.<\/p>\n Everything Walker said sure does make sense to me!<\/p>\n Then, despite that litany of gloom, we have a host of bright skies.<\/p>\n March retail sales showed that consumers continued to increase their spending on non-fuel products. “Core” retail sales \u2014 which excludes food services, autos, building materials, and gas station sales \u2014 rose the most since August, lifting the year-over-year growth rate to 4.6% from 4.2% in February.<\/p>\n Here’s what consumer CEOs have told me within the past month:<\/p>\n American Express (AXP<\/a>) CEO Stephen Squeri said, “Look, we’re not representative of the economy. From a [billings] growth perspective, it’s because the premium consumer is still spending. Are they immune? You know, our card members are rolling with it. They’re still spending in restaurants, they’re spending in lodging, they’re spending on travel. I think one of the leading indicators here that they’re going to continue to spend is the advanced travel bookings. They continue to book in advance.”<\/p>\n PepsiCo (PEP<\/a>) CEO Ramon Laguarta told me that consumers are responding well to lower-priced Frito-Lay snacks, and the snacks business improved in terms of volume in the first quarter.<\/p>\n Ulta Beauty (ULTA<\/a>) CEO Kecia Steelman told me that consumers aren’t trading down to cheaper cosmetics or visiting less because of higher gas prices.<\/p>\n “95% of our sales are coming through our loyalty platform,” she said. “When we survey them [consumers], what they tell us is that if they have a routine, they are really confident they’re not going to compromise on that routine, which they view that as self-care for themselves … Now, I’m not saying that could not change if gas prices are continuing to go up and if the consumer is getting squeezed.”<\/p>\n Are you confused by your fellow consumer? I am! What am I missing? Please drop me a line on X and share your thoughts.<\/p>\n Brian Sozzi<\/a> is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi<\/a>, Instagram<\/a>, and LinkedIn<\/a>. Tips on stories? Email brian.sozzi@yahoofinance.com.<\/p>\n Click here for in-depth analysis of the latest stock market news and events moving stock prices<\/a><\/p>\n Read the latest financial and business news from Yahoo Finance<\/a><\/p>\n