Heads Up: Retail Spending Momentum Turns Negative
(Note: The Vice Index is lagged: recent vice spending pullbacks are reflected in the chart above starting June.)
Consumer Spending Slowing Down
Regular readers know the Vice Index is the real way to measure the breadth of the U.S. consumer. It factors in many disposable spending habits like alcohol, marijuana, prostitution and gambling.
Everyone knows consumer spending (including disposable spending) is the lifeblood of the US economy. There are different but related measurements:
In other words, discretionary spending is the spending on wants after the needs get covered: taxes, interest, savings, and basic needs. It includes luxuries like apparel, cars, TVs, vacations and so on.
Discretionary Incomes are directly impacted by changes in incomes and inflation. But the spending of that income is most influenced by the state of the economy and expectations about the future, which affects consumer confidence and the willingness to spend or not.
Retail spending is an incomplete measure of consumer spending because it only follows spending at stores and virtual stores. By definition it excludes major luxury spending like recreation (vacations, sporting events, gambling, air fares, and so on). That’s a significant gap: US gambling is a $240 billion (B) industry.
An Even Higher View Of The Vice Index
Vice spending is broadly representative of the US consumer:
And vice spending is highly sensitive to near-term economic conditions:
