Getting Outside, Expensive Turkeys, and US Consumers, Terry Gardner, C.J. Lawrence 11.22.22

In this video, Terry Gardner reviews the American Farm Bureau’s survey of Thanksgiving dinner costs and examines the health of the U.S. consumer.

Hey, good morning everyone. It’s Terry Gardner from C.J. Lawrence. It’s Tuesday the 22nd of November, coming to you from the beautiful great South Bay here on the south shore of Long Island. Just to the south of me here are some boats probably chasing some stripe bass to put on their Thanksgiving plate. As well on some islands just over towards the lighthouse, a couple of buddies of mine are over there, probably harvesting some oysters for Thanksgiving appetizers as well.

Thought we’d come to you from outside today. It’s Thanksgiving week, which means that we take a look at the Thanksgiving dinner price index, which we do every year around this time. We cite the American Farm Bureau, which tracks a basket of items you would traditionally serve with your Thanksgiving meal. And they’ve tracked the same 10 items for 10 people over a series of decades.

So you get a very consistent reading, and it’s kind of fun to take a look at. But not surprisingly, that basket is going to cost you a whole lot more this year than it has in past years. Typically, that basket fluctuates very little, and in some past years, we’ve seen some declines in prices, but this year your Thanksgiving meal is going to cost you about 21% more than it did last year at Thanksgiving.

What’s driving the increase? It’s the bird, primarily the bird. A 16-pound Turkey will run you about 21% more than it did last year. There are some outliers in the survey, surprisingly, and someone’s going to have to explain this one to me, a bag of stuffing is going to run you 69% more than it did last year. I’m not sure how, a bunch of breadcrumbs with some seasoning warrants a 69% increase, but that’s what the survey cites.

On the other side, there’s one item where we’ve seen a price decline. Most items stayed within that 20, 21, and 22% range. So similar to Turkey. But cranberries this year, cranberries are down 14% from last year. So for my Massachusetts friends, thank you. I don’t like your red socks or your Patriots, but really love your cranberries, and appreciate the hard work you’re doing out there on the Cranberry Bog. So 14% decline in cranberries.

So that’s the survey for this year. Kind of important to watch how the consumer behaves around this time of year, going into Black Friday and the big spending season into the holidays. The consumer, if you remember a couple of years ago I wrote a piece about the US consumer being the atlas that carries the global economy, I think probably more so even this year. Remember that the US consumer accounts for about 70% of the US GDP. So the health of the consumer is really important to the health of our US economy and its growth, and ultimately how that impacts the market and stock prices.

And we’re watching several different metrics indices companies that are reporting to measure the health of the US consumer. And I would say that signals are mixed so far. Retail sales for the month of October actually rose 1.3%, which is pretty robust. That’s actually the best result in eight months. But at the same time, much of that growth was driven by higher prices. Some anecdotes that we’ve picked up along the way. Home Depot noted in their results that their sales were higher, but driven mostly by higher prices and a less-than-expected increase in tickets. So the number of people and the number of items that they’re buying in the store did not increase to the level of expectations. Consumer confidence figures have been coming in from different surveys, and they’ve been weakening.

The New York Fed puts out some data, which they did last week, on the health of the consumer and on credit card debt and mortgage debt, those numbers are really taking off. But at the same time, when you measure them versus disposable income, they’re within the boundaries of historical averages. They’ve been ticking up each quarter for the last four or five. So the measurement is household debt versus disposable income, so something to watch, we’d like to see that start to level off. And then finally, a couple of names, a couple of companies that have reported results that gave us a window. Walmart and Target both reported their results were very different. Walmart was much healthier than Target. Much of that had to do with inventory. This morning, Best Buy and Sporting Goods reported, that they were better than expectations but about 20 to 30% below last year.

So you’ve got to watch the US consumer and the health of the US consumer as we enter 2023 here. In summary, as we have been suggesting, stay selective, and stay very focused on companies that are delivering earnings growth without the need for a macro push, meaning regardless of the macro backdrop, these companies will earn and grow earnings on a very consistent and steady basis. And that’s really it for today. Most importantly, we’d like to wish, on behalf of C.J. Lawrence and our team, wish you and your family a very happy Thanksgiving.

Certainly, if you’ve got any questions or want to catch up in the coming weeks, give me a ring at 212-888-6403, or at tgardner@cjlawrence.com, and have a great day.