The dynamics of American consumption from macro and micro perspectives

According to the financial news app Zhitong Finance, CITIC Securities released a research report stating that consumption is an important window to observe the momentum of the U.S. economy. From a top-down perspective, it is observed through the description of the Federal Reserve, official statistics, and alternative data that U.S. consumer demand is stable but not strong. The difficulty for optional consumer companies to raise prices to consumers has increased, and household consumption is becoming more practical without reducing spending. From a bottom-up perspective, it is found that the overall financial performance of U.S. consumer companies is steadily growing but the momentum is weakening. Most leading companies in essential consumer goods are optimistic in their performance outlook, while most leading companies in optional consumer goods are more cautious. Although market consensus expectations have been revised downward, there is still considerable confidence in the stable but not strong consumption trend in the United States. Consumers may pay more attention to value for money, and the performance prospects of essential consumer companies in the U.S. stock market may be more resilient than those of optional consumer companies.

Consumer demand is an important window to observe the momentum of the U.S. economy.

Against the backdrop of easing inflation in the United States, the market has become more sensitive to growth-related data in recent times. Concerns about the U.S. growth prospects in the market were initially exacerbated by the unexpected employment report, but then eased due to better-than-expected non-manufacturing PMI and retail sales data. Economic data seems to give an initial sense of fatigue but with unclear signals. Among the plethora of information, the focus is on the consumer sector, which accounts for nearly 70% of the U.S. economic structure, to first look for consumption trends in macro data from a top-down perspective, and then summarize the business dynamics in corporate financial reports from a bottom-up perspective, attempting to outline the current landscape of the U.S. consumer sector.

From a top-down perspective, U.S. consumer demand is stable but not strong, and household consumption is becoming more practical.

CITIC Securities looks for U.S. consumption trends from a top-down perspective through the Federal Reserve's textual descriptions, official statistics, and alternative high-frequency data. It is observed that U.S. consumer demand is currently stable but not strong, with residents still enthusiastic about value-for-money consumption. The difficulty for optional consumer companies to raise prices to consumers has increased, some price-sensitive consumers have begun to downgrade consumption quality, and household consumption behavior is becoming more practical, but there is no clear observation of households reducing spending at the macro data level.

From a bottom-up perspective, U.S. consumer companies' financial performance is steadily growing, but the momentum is weakening.

An analysis of the performance of consumer companies in the S&P 500 shows that overall 2Q financial performance is still expanding, but the momentum has weakened compared to the previous quarter, and the upward trend in profitability has also slowed down. During the financial reporting period, the market continued to downwardly revise previous expectations for high growth in 2024/2025 consumer performance. The trend of weakening growth momentum in optional consumer goods compared to essential consumer goods is more pronounced, which is also evident in the statements made during the performance briefings of leading consumer companies. Additionally, although there has been a revision in consumption growth momentum, the market still expects steady financial performance growth for consumer companies in 2024, with an acceleration in 2025, reflecting considerable confidence in U.S. consumption.

The trend of stable but not strong consumption may continue, with essential consumer goods possibly being more resilient.

On one hand, with the easing of inflation in the United States, real wages may continue to grow moderately, supporting household real purchasing power. Therefore, in the context of depleting excess savings, the growth rate of household consumption may gradually decline to a level matching the growth rate of disposable income, but the decline should not be too drastic On the other hand, there is no strong correlation between the decrease in non-farm employment and the rising unemployment rate in states in July and the path of Hurricane Beryl. This indicates that excluding the hurricane factor, the demand for labor in the United States is indeed slowing down, perhaps suggesting that consumers will pay more attention to value for money before the economic recovery. Combining corporate financial reports and performance guidance, the prospects for mid-range consumer businesses are promising, and the performance outlook for essential consumption may be more resilient than optional consumption