This is what our consumer believes today, The Conference Board report suggests.   Dismal. 

Ironically, that same consumer believes “current business conditions” are “good” — better than last month!   This is quite a dichotomy.   Of course, the SHI is also a consumer sentiment index, right?   So it will be interesting to see how this week’s SHI numbers look at the same time.   Exciting!

 

Welcome to this week’s Steak House Index update.

 

If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/

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Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.   But is the US economy expanding or contracting?

Expanding … according the ‘advanced’ reading just released by the BEA, Q3, 2024 GDP grew — in ‘current-dollar‘ terms — at the annual rate of 4.7%.

The ‘real’ growth rate — the number most often touted in the mainstream media — was 2.8%.   In current dollar terms, US annual economic output rose to $29.35 trillion.

According to the IMF, the world’s annual GDP  expanded  to over $105 trillion in 2023.   Further, IMF expects global GDP to reach almost $135 trillion by 2028 — an increase of more than 28% in just 5 years.

America’s GDP remains around 25% of all global GDP.  Collectively, the US, the European Common Market, and China generate about 70% of the global economic output.  These are the 3 big, global players.   They bear close scrutiny.

 

The objective of this blog is singular.

 

It attempts to predict the direction of our GDP ahead of official economic releases.  Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.

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Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore “fun” items of economic importance.   Hopefully you find the discussion fun, too.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.

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The Blog:

 

Politics is fun.  Tuesday morning, Chuck Schumer — our US Senate Minority Leader — commented, “To the large businesses that sell to consumers I say, show your customers how much tariffs are hurting in their pocketbook.”

He made this public comment around the same time The Conference Board released it’s latest survey results.   What is The Conference Board, you ask? 

 

The Conference Board is the global, nonprofit think tank and business membership organization that delivers Trusted Insights for What’s Ahead^®. For over 100 years, our cutting-edge research, data, events and executive networks have helped the world’s leading companies understand the present and shape the future.

 

Chuck Schumer may disagree, but I’m thinking the consumer doesn’t need any help here.  They know.   Clearly, the consumer has already figured out how bad tariffs are for their pocketbook or wallet. 

 

 

These numbers matter.   As I’ve commented previously, a worried consumer doesn’t spend beyond necessities.   Things like a new washing machine or <GASP!> an expensive steak dinner at Mastros are on the chopping block.    My god!?!   Will the SHI10 be dismal too this week?

We’ll get to that.  

But first, earlier this morning, the initial ‘estimate’ of the Q1, 2025 GDP report was posted by the Bureau of Economic Analysis.   The Q1, 2025 number was <GASP!> negative!   This is the first time since 2022 that US economic growth contracted in a calendar quarter:

 

 

But did our economy really contract in Q1?  

That’s what the numbers say — but are the numbers accurate in this case?   My long-time readers may remember I believe the numbers are always accurate.   Inherently.   But I’m going to break my own rule here:   This GDP reading is different.   It is inaccurate.    Here’s why.  

Take a look at this graph:

 

 

That’s right:   Imports EXPLODED in Q1.   Which means, effectively, the GDP component called “net exports” was HUGELY negative.  Why?  

Tariffs.   Well, maybe not tariffs, but the threat of tariffs in March led to a MASSIVE IMPORT PULL FORWARD.   Items that would have been imported later without a tariff threat, dramatically increased current US imports.   I suspect the same issue also impacted the ‘Investment‘ component as well.  (See above).   The bottom line:   This quarter’s GDP number is at worst, wrong, and at best, unreliable.   We can’t believe it.   It is not indicative of the actual performance or growth in Q1.   It is, however, an effective current measure of the high level of fear and insecurity our the business sector.  

Yes, both the consumer and businesses are worried about the future.   Let’s jump over to our expensive eateries:

 

 

Hmmm … not much new here.  Reservation demand in our 40 super expensive steak houses is fairly robust. 

Here’s the longer-term chart:

 

 

Nope, we definitely don’t see a ‘contraction’ here.   Reservation demand, frankly, looks fairly consistent.  

Finally, consider the following thru the lens of our blog’s title today, ‘lacking confidence:’   

 

Listening to the ‘talking heads’ on CNBC earlier today, a retail expert commented that Christmas goods — you know, the import “stuff” Americans will buy in November/December as X-mas gifts — is typically ordered by or before June 4th to meet the production and ocean freight delivery schedules.    June 4th is Monday.  

 

Can you imagine the stress US importers must be feeling right about now?   Should they order goods from China before June 4th, knowing they may have to pay a 145% tariff when those Chinese goods finally arrive at the US port?   Or do they ‘pass’ on the order, understanding their X-mas sales will suffer dramatically?   Or somewhere in between?   Ouch.   Good luck, purchasing agents.  

If the weather cooperates, it might be a white Christmas this year.   But all signs suggest it won’t be very green. 

<:  Terry Liebman  :>