Staples Trump Discretionary

QI TAKEAWAY —  Toy inflation is direct byproduct of the challenging supply chain environment. Industry sources pushing a buy-now mentality before the holidays equates to validating of higher inflation psychology. More broadly, inflation expectations are taking a toll on income and spending expectations. The bearish guidance, augmented by the 2011 debt ceiling standoff precedent, suggests staples are the better option if you have consumer sector exposure.

  1. The second and third quarters of 2021 saw CPI for toys post positive YoY prints for the first time since Q4 1996 and Q1 1997; California PMI Supplier Deliveries Index should continue to surge into Q4, with Chapman University expecting times to slow at a record high rate
  2. Cox Transportation recently announced that shipments have declined by nearly 5% as a result of supply chain issues; coincidentally, the only bright spot in August’s job openings data was in trade/transportation/utilities, with all other major sectors seeing declines
  3. In the NY Fed’s Survey of Consumer Expectations, household income growth and spending expectations both turned negative in August and September; this poses downside risk for real consumer spending, with the consensus at 2.1% and 4.2% for Q3 and Q4, respectively