ETSY and STARBUCKS Alert Consumers AREN'T BUYING!
With the S&P 500 at 5200, unemployment at 3.9%, home prices nearing all-time highs, and inflation at 3.48%, there isn't much evidence to suggest that the economy is in trouble.
However, recent developments in one corner of the finance world are raising eyebrows.
Freshly analyzed data indicates another side to the story, where the consumer is struggling. Outside of real estate, stocks, and wages, consumer spending is arguably the most crucial part of the economy, accounting for about 70% of US economic activity.
This substantial piece of the economic pie is essentially the entire economy, and new data suggests it may be in a serious downturn.
Several unique companies have reported earnings in recent weeks, hinting at brewing troubles in the macro environment. For instance, Etsy's Q1 earnings report emphasized that something is amiss with consumer behavior.
The term "macro" was mentioned 11 times, underscoring the macroeconomic pressures reducing consumer spending. The main takeaway is that consumers are financially strained, often having little money left after covering essentials like food, fuel, housing, and childcare. Etsy, which operates in the discretionary sector, is a key economic indicator. When consumers have surplus cash, they purchase non-essential goods like customized wooden wall maps.
Conversely, when finances are tight, these items are the first to be cut, signaling early economic downturns. This is well known to investors, who have been selling for years. Since its peak in November 2021, Etsy's stock has fallen by over 70%, and by nearly 50% since 2023. The market’s awareness of the weakening consumer strength suggests further declines may be imminent
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