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Investors should be forgiven if they are are confused over the state of the American consumer.
The narrative used to be a binary question, whether the resilience of the consumer would power through tariff uncertainty, like other moments in recent history. But this earnings season has blurred the answers, instead offering a more complicated picture.
Corporate results have so far put forth two different but not altogether contradictory perspectives about the nation’s spending habits. They highlight the fluid nature of the tariff negotiations and the waiting game that has delayed understanding of what the levies will ultimately mean for people’s pocketbooks and corporate bottom lines.
The first view props up a consumer largely unaffected by the trade war swirling around them. “Financial-related companies (and Telecom companies) continued to describe the consumer as solid and still spending,” wrote Lori Calvasina, RBC Capital Markets head of US equity strategy, in a report published earlier this week.
Things are going fine, actually, some management teams seem to be saying. With consumers staying disciplined and not overextending, shopping habits through this lens are at healthy levels. Some companies noted this may be the case because consumers still have their jobs.
Read more: What Trump’s tariffs mean for the economy and your wallet
While weeks of souring consumer surveys have underscored a more pessimistic mood and fears of an economic downturn, businesses have nonetheless retained workers. (Labor Department data published Tuesday showed job openings in March hovered near a four-year low, but layoffs are also low. Friday will bring the release of the April jobs report, shedding more light on that theme.)
A second view of the consumer, according to the RBC report, more closely tracks those downbeat surveys. In this wave of quarterly announcements, consumer companies have adopted a more negative tone on spending. Executives observed shoppers engaging in value-seeking behavior, like frequenting less expensive merchants or trading down to store brands. Look at Chipotle’s results.
They also note how uncertainty is influencing how people spend. Some households are choosing to hold off on buying big-ticket items or are rushing to get ahead of tariff upcharges, pulling forward their purchase of a car or smartphone. March’s retail sales had some “last hurrah” energy before the big, telegraphed tariff announcement.
