Piper Sandler's Top Economist Sees "Big Bounce" In Consumer Sentiment As Gas Prices Tumble

Building on last week's theme of "early signs of a turn in U.S. consumer discretionary," Piper Sandler analysts note that the sharp decline in gasoline prices at the pump is beginning to lift consumer sentiment, particularly among lower-income households. Their proprietary daily confidence data suggest the rebound is still in the early innings, but the direction is clear: cheaper gas is easing pressure on working-class folks.

Piper Sandler's chief global economist and head of the firm's economics research team, Nancy Lazar, provided clients with three of the most important consumer conclusions of the week as the national average for gas at the pump tumbled due to easing tensions in the Middle East:

1. The steep rollover in gasoline prices triggered a big bounce in PSC’s Daily Confidence Survey last week, with low-end consumers particularly more cheerful.

2. With all daily survey components improving, the observed retail sales aggregate has hooked up.

3. Higher prices weighed on consumers last quarter, according to Kroger & La-ZBoy.

Lazar's note, titled "The Gasoline Down-Confidence Up Two-Step," says that cheaper pump prices are now producing consumer tailwinds amid a still-healthy labor market.

She shows that Piper Sandler's proprietary high-frequency gauge of U.S. consumer sentiment, conducted by Rasmussen Reports, "appears to have bottomed, mirroring the sharp rollover in gasoline prices – adding to economic tailwinds from refunds and healthy labor."

"The impact of easing pump prices is clear in both confidence and consumption," Lazar continued in the note.

In markets, she pointed out, "The Russell 2000 and XRT retailing ETF certainly act as if the bottom is in for confidence."

More consumer sentiment data from Piper's internal sources show improvement:

The rebound in sentiment could help drive consumers back into retail stores and support spending on experiences...

Great news for the Trump administration, with 136 days until the midterm elections this fall. 

Professional subscribers can read more consumer notes at our new Marketdesk.ai portal.