December 10, 2018 Consensus

The Weekly Consensus – December 10, 2018 (Volume 10, Number 47)

The Big Story
Christmas Past, Present, or Yet to Come?
Billy Busko

It feels as though U.S. consumers – and the global economy at large – are watching Charles Dickens’ beloved novella, A Christmas Carol.  That it’s December and the Holidays are approaching only add to the staging.

Like the various ghosts, tariff news keeps coming.  We’ve seen the Ghost of Christmas Past.  Then we saw a possible glimpse of Christmas Present, but then quickly returned to Christmas Past. And now we wait on Christmas Yet to Come.  Similar to Ebenezer, this has all happened in what seems to be about a day, leaving wholesalers, retailers and consumers wondering what to do.

Christmas Past:  In June, the U.S. initially announced imposing tariffs on $34 billion of Chinese products.  When there was no immediate positive movement from China, the U.S. quickly added tariffs on another $16 billion of Chinese products.  This time China responded by reciprocal action: applying tariffs on $50 billon of U.S. goods.  It should be noted that, in an effort to soften repercussions on the U.S. consumer, the U.S. tariffs were targeted at industrial products.

In September, the U.S. imposed tariffs on an additional $200 billion of products, which meant that nearly half of all Chinese imports into the U.S. faced levies.  Further, the initial tariff of 10% is scheduled to increase to 25% on January 1, 2019, and the U.S. consumer sector was no longer spared.  Categories such as electronics, appliances, furniture, food and personal accessories are now included.  China responded by applying tariffs on an additional $60 billion of U.S. goods.

In October, multiple media sources reported that the U.S. was preparing to apply tariffs on the remaining Chinese imports, which would impact another $257 billion of Chinese products.  When reported, the Dow Jones dropped 700 points.

Christmas Present:  A week ago Sunday, December 2nd, President Trump and China’s President Xi had dinner at the G20 summit in Argentina.  The official White House press release regarding the dinner announced that the U.S. would delay the tariff increase by 60 days and that, “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the U.S. to reduce the trade imbalance between our two countries.”  It was also agreed that the two countries would “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.”

With uncertain expectations in advance of the dinner meeting, coupled with positive tweets by President Trump the following day, markets interpreted the press release favorably.  The Dow Jones rose 300 points.  The National Retail Federation issued a statement, “We commend the efforts to restore a fair and balanced trade relationship with China.  The administration’s decision to give diplomacy a chance and at least temporarily avoid the imposition of increased and additional tariffs is an encouraging sign.”

Christmas Present gave hope that Christmas Yet to Come would indeed be merry.

However, a couple of President Trump Tweets just the next day were viewed negatively (including a self-reference as a “Tariff Man”), and there was still no official statement released by China.  The Dow Jones sank 800 points (note, though, that the day included other news that undermined the stock market).

Christmas Yet to Come:  U.S. companies paid a record $6.2 billion in tariffs in October, a number that will likely be exceeded in November and again this month.  On the other side, retaliation from China as well as from Canada, Mexico, the European Union and other countries is resulting in record amounts of tariffs paid on goods exported by U.S. companies, which is impacting demand for such goods.  As a strategy to dampen the potential escalating costs of Chinese imports, both wholesalers and retailers are bringing merchandise into the U.S. at a record pace – in advance of the possible 25% tariffs.  For the first time ever, over two million containers of goods landed at U.S. ports in one month in November.

If the impasses are unresolved and the 25% tariff goes into effect, a cost of $125 billon will be borne.  The question is then by whom?  Will Chinese suppliers cut costs or will the U.S. wholesalers and/or retailers absorb higher costs?  Or will it be the U.S. consumer who ends up paying higher prices?  A reasonable expectation may be that all parties would pay a part. Or better yet, the trade war does indeed end, and Christmas just comes late.

 

Headlines of the Week

Sears Chairman Edward Lampert bids $4.6 billion to rescue iconic retailer from bankruptcy

The hedge fund run by Sears Chairman Edward Lampert is offering to buy many of the bankrupt retailer’s remaining assets for about $4.6 billion with hopes of keeping the chain in business and continuing to employ about 50,000 of its workers. The bid from Lampert’s ESL Investments includes about 500 Sears and Kmart stores, headquarters and distribution centers, and Sears brands and businesses including Kenmore, DieHard and Sears Home Services.

Walmart Accelerates Online Push with Another Acquisition

Walmart is beefing up its home category by adding art to its palette. The discounter announced that it plans to acquire the assets of Art.com — the world’s largest online retailer in the art and wall décor category with two million curated images — including its catalog, IP, trade name, and U.S. operations. Terms of the deal, which expected to close early next calendar year, were not disclosed. Founded in 1998, Art.com features a wide assortment that ranges from affordable posters to limited edition prints and art pieces. It also offers a growing exclusive assortment and personalized print-on-demand capabilities.

 

 

Apparel & Footwear

Crocs to buy back 50 percent of Blackstone preferred stake as rebound builds

Crocs Inc. will buy back and convert some of the preferred shares held by Blackstone Group LP in the latest sign that a multiyear turnaround effort has put more spring in the step of the maker of colorful, rubbery shoes. The footwear maker will pay $183.7 million for half the preferred stock Blackstone acquired as part of a $200 million investment in early 2014, Niwot, Colorado-based Crocs said in a statement Monday. Crocs’s shares were trading at about $15 at the time of the initial deal and have since risen to $27.80. The private equity firm also got two board seats under the 2014 agreement. After Blackstone’s investment, Crocs cut costs by closing underperforming stores and exiting unprofitable markets. It also boosted gross margins by improving the quality of sales and reducing excess inventory.

Gap Evolves Its Marketing Strategies with Its New Digital-First Brand Hill City

When Gap Inc. launched the men’s activewear label Hill City in September, it marked its first new brand in a decade, and its first-ever foray into digital-first territory. Hill City has some notable differences compared to other DTC companies – like corporate ownership and a running start with distribution in 50 Athleta stores (Gap’s activewear brand for women). But Hill City will bring the ecommerce startup mentality when it comes to focusing on data-driven marketing. The brand’s marketing mix to start has been about 40% social media (primarily Facebook, Instagram and Twitter), 20% search and 40% programmatic. But those numbers will shift fluidly based on what’s performing and the brand’s day-to-day marketing priorities.

Gymboree to close Crazy 8 stores and cut back namesake stores; names CEO

Just 14 months after it emerged from bankruptcy, Gymboree Group announced a “strategic review” and a major downsizing of its store fleet. It also named a new chief executive. The children’s clothing retailer said it has initiated a comprehensive review of strategic options which could include a sale or other transactions for its Gymboree, Janie and Jack and Crazy 8 brands. The company also said it plans to close its value-oriented Crazy 8 stores and “significantly” reduce the number of Gymboree store locations in 2019. Gymboree filed for Chapter 11 bankruptcy protection in June 2017, and emerged later that year, in September, with about 350 less stores (giving it a total of about 380 locations) and new owners. It also cut its debt by some $1 billion. The company also revealed that, on November 18, Shaz Kahng, a member of the board since September 2017, was appointed CEO of Gymboree Group. She brings 30 years of retail leadership experience, and was instrumental in leading turnarounds of Lucy Activewear and various Nike business segments, according to Gymboree.

  1. Jill CFO out amid turnaround
  2. Jill last week announced that Chief Financial and Operating Officer Dave Biese will leave the company on April 30 next year and is assisting with his replacement. The board at the women’s apparel retailer has hired executive recruitment firm Heidrick & Struggles for the search, according to a company press release. The news comes as the company also reported that third quarter net sales rose 7.5% to $174.1 million from $162 million in the year-ago quarter. Total comparable sales, including store comps and direct to consumer, rose 1%, the 18th consecutive quarter of positive store comps, with e-commerce performing better than expected, CEO Linda Heasley told analysts. In a conference call with analysts Wednesday, Heasley expressed confidence in J.Jill’s brand, and promised more focused and agile operations to take advantage of that.

 

Athletic & Sporting Goods

Chinese investors lead a $5 billion bid for Amer Sports

Chinese investors are leading an attempt to buy Amer Sports, the owner of brands including Louisville Slugger and Wilson, for more than $5 billion.  A consortium led by China’s Anta Sports has offered €40 ($45) per share to acquire the Finnish sports company.  The group of buyers includes Chinese tech firm Tencent and an investment company owned by Lululemon Athletica founder Chip Wilson.  The offer values Amer Sports at €4.6 billion ($5.2 billion).  Amer Sports owns baseball equipment maker Louisville Slugger, trail running brand Salomon, racquet maker Wilson and the ski brand Atomic.

 

Callaway Golf signs agreement to acquires Jack Wolfskin for $476m

US-based sporting goods company Callaway Golf has signed an agreement to acquire Jack Wolfskin, a German manufacturer and retailer of outdoor footwear and equipment, for $476m.  Following the acquisitions of Travis Mathew and Ogio last year, Callaway has further pushed into the active lifestyle category with the latest acquisition.  In the fiscal year ended September 2018, Jack Wolfskin’s net sales had touched $380m based on preliminary unaudited results.  Jack Wolfskin targets the active and urban outdoor customer categories.  It manufactures outdoor apparel, footwear and equipment, which are sold through over 3,000 points of sale globally, including wholesale, company-owned retail and franchisees.

Dick’s Sporting Goods Says Gun-Control Stance Hurt Business, May Close Field & Stream

Dick’s Sporting Goods told investors during the Goldman Sachs Retailing Conference that its gun-control stance hurt sales of its hunting business, outdoors business, and that it may close its outdoor-focused Field & Stream stores.  Edward Stack, chairman and CEO of Dick’s, said during the event that the sporting goods chain’s recent 3.9 percent drop in same-store sales was the result of a mix of factors beyond their control as well as some he called “self-imposed.” Specifically, he said, “the decisions we made on firearms” negatively affected their bottom line but the drop in sales was something they expected. They did not, however, regret their decision to change a number of their gun-sales policies and back new gun-control legislation.

Nike’s New Consumer Experience Distribution Strategy Hits The Ground Running

In mid-2017 Nike unveiled its plan for growth called the Triple Double Strategy (2X). Through it, the company promised to double its “cadence and impact of innovation,” double its speed to market and double its “direct connections with consumers.”  The cornerstone of the Triple Double Strategy is the Nike Consumer Experience (NCX), which includes Nike’s own direct-to-consumer network, as well as a vastly streamlined slate of wholesale distribution partners.  At a time when most big international companies would be doubling down on what made them successful in order to defend their turf, Nike is going on the offense in a “disrupt yourself” way to propel the company faster and further into the future.

Cosmetics & Pharmacy

P&G Closes Buy of Merck KGaA’s Consumer Health Business

Procter & Gamble now has a larger consumer brand portfolio and geographic scale. The company announced that it has completed its €3.2 billion acquisition of Darmstadt, Germany-based Merck KGaA’s consumer health business. The company said the acquisition increases its footprint in most of the world’s top 15 OTC markets. Top brands that join the Cincinnati-based company’s portfolio include Neurobion, Dolo-Neurobion, Femibion, Nasivin, Bion3, Seven Seas and Kytta — all of which are sold largely in Europe, Latin America and Asia.

 

Crown Labs Buys 5 Brands from GSK

Johnson City, Tenn.-based Crown Labs has added several OTC brands to its portfolio. The company purchased the North American distribution rights for acne wash PanOxyl, anti-itch lotion Sarna, anti-fungal Zeasorb, anti-fungal powder Desenex and pain-relief gel Mineral Ice from GlaxoSmithKline. “Acquiring these strong heritage brands strengthens Crown’s OTC portfolio and adds significant value across multiple categories,” said Jeff Bedard, Crown Labs president and CEO.

Walgreens Delves Deeper into Groceries with ‘Kroger Express’ In-store Shops

Walgreens and Kroger Co. are expanding their fledgling partnership. In October, the two retailers announced a partnership to sell grocery items from Kroger private-label line Our Brands at 13 Walgreens test stores in Northern Kentucky, near Kroger’s Cincinnati headquarters, and for customers to order Kroger grocery items online and pick up the goods at the test stores. The pilot is now being extended to include an initiative called “Kroger Express,” a branded section that will offer a curated assortment of 2,300 grocery products in the 13 Walgreens test stores. The assortment will include Home Chef meal kits, national products and Kroger’s Our Brands private label line.

 

Discounters & Department Stores

Walmart gives employees VR combat training for holiday rush

Walmart is doubling down on its enterprise VR training experiment over the holidays. According to insiders, the company has trained more than a million associates across its stores using VR technology to prepare for the holiday rush. That follows the announcement in September that Walmart was acquiring more than 17,000 Oculus Go headsets for its associate training by the end of the year. It’s one of the largest VR-based employee training programs in the world, and the industry has been watching it like a canary in a coal mine.

Neiman Marcus bondholder revolts over restructuring

The board of Neiman Marcus allowed its private equity owners to “improperly strip” a valuable subsidiary from the luxury department store chain, according to an aggrieved bondholder who is demanding the return of the assets. Daniel Kamensky, whose Marble Ridge hedge fund vehicle has taken a position in Neiman debt, on Monday blasted the retailer’s board for a transfer involving its fast-growing MyTheresa ecommerce unit.

Neiman has struggled with $4.7bn of debt and the same headwinds that have held up other store chains.

 

Emerging Consumer Companies

Birchbox launches in select Walgreens stores

Birchbox, the subscription business delivering personal care products and accessories to consumers every month, debuted in a number of Walgreens stores across the United States last week. The launch followed an investment by Walgreens in Birchbox earlier this year, and a broader commercial partnership that will see Birchbox expand into select Walgreens with a physical presence and dedicated space within the Walgreens store.

Eloquii opens pop-up store

Last week, Eloquii, fresh off its acquisition by Walmart in October, opened its first New York City pop-up. Situated in Soho, the store will remain open through December 31st, and will focus on events and consumer experiences. The brand has existing locations in Chicago, Detroit, Houston, Miami, and outside Washington DC.

Ministry of Supply releases Alexa-enabled Jacket

Announced earlier this year, Ministry of Supply’s Alexa-enabled smart jacket that adapts to a wearer’s body heat came to market last week. The jacket is available in both men’s and women’s styles, and can be controlled with Amazon Alexa or a phone app, which can then heat up the jacket. It includes a wireless charging port. For Ministry of Supply, renowned for its innovation and technical fabric in workwear and clothing for everyday life, this marks its most ambitious product yet in outerwear.

 

 

Grocery & Restaurants

C&S to buy Olean grocery cooperative

C&S Wholesale Grocers Inc. plans to acquire regional distributor Olean Wholesale Grocery Cooperative Inc. Financial terms of the deal weren’t disclosed. Keene, N.H.-based C&S said it expects the transaction to close early next year. Olean Wholesale serves more than 270 independent food retail and convenience stores across New York, Pennsylvania and northeastern Ohio.

 

Flynn Restaurant Group acquires 368 Arby’s

Flynn Restaurant Group L.P. has acquired 368 Arby’s from U.S. Beef Corp., expanding its casual-dining and quick-service portfolio of franchised concepts to $2.3 billion in annual sales. The acquisition by San Francisco-based Flynn brings the company’s restaurant total to 1,245 in 33 states, including locations of casual-dining Applebee’s Neighborhood Grill & Bar, fast-casual Panera Bread and quick-service Taco Bell. The deal with Tulsa, Okla.-based U.S. Beef will add about $400 million in annual sales to Flynn’s current $1.9 billion.

Fat Brands acquires Yalla Mediterranean

Yalla Mediterranean — a Manhattan Beach, Calif.-based fast-casual chain serving build-your-own wraps, salads, and platters — was acquired by Fat Brands Inc. Terms were not disclosed. But Yalla Mediterranean joins the Fat Brands portfolio, which also includes the Fatburger chain; Buffalo’s Café and Buffalo Express; Hurricane Grill & Wings; and the buffet/steakhouse chains Ponderosa and Bonanza Steakhouse.

Global Franchise Group eyes expansion under new owners

Global Franchise Group is eyeing possible acquisition opportunities with its sale to two private-equity firms. Los Angeles-based Levine Leichtman Capital Partners closed Nov. 19 on its sale of the Atlanta-based GFG Holding Inc. to two private-equity partners: London-based Lion Capital and Toronto-based Serruya Private Equity. Terms of the deal were not disclosed. Global Franchise Group holds such brands as Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery/MaggieMoo’s, Pretzelmaker and Round Table Pizza.

Home & Road

RH Details Expansion Strategy, Other Developments for 2019

RH upped its expansion strategy and raised its guidance for the year amid third-quarter earnings that beat Street expectations. The luxury home retailer is accelerating its expansion starting in 2019, with plans to open five to seven new “Gallery” locations per year, up from three to three to five. It also is exploring opportunities to expand in London, Paris, and other parts of Europe. The locations scheduled to open in 2019 will include Edina, Minn.; Charlotte, N.C.; Corte Madera, Calif.; San Francisco; and Columbus, Ohio. In addition, RH will open its first boutique hotel, RH Guesthouse, this fall, in Manhattan’s Meatpacking District, across from its new store.

Ikea to Bring New Store Concept to U.S.

Ikea is finally dropping anchor in the Big Apple — but not with its typical format. Ikea will open its first-ever city-focused location in the United States next spring, in Manhattan. The store, called Ikea Planning Studio, will feature smart solutions for urban living and small spaces. It is designed to give customers the opportunity to discover, select and order Ikea products for delivery to their home. Ikea opened its first store under the Planning Studio banner in October, in London. The shop, which specializes in kitchens and bedroom furniture, displays just a tiny portion of Ikea’s range of goods, all of which can be ordered online. It offers shoppers one-on-one advice with store staff. Nothing is available for take home the same day.

AutoZone Comes out of the Gate fast as Earnings Surge

AutoZone topped Wall Street’s first-quarter earnings estimates amid an acceleration of its commercial growth and a solid performance from its DIY business. Net income surged 25.1% to $351.4 million, or $13.47 a share, for the period ended from $281.0 million, or $10.00 a share, from the year-ago period. Analysts had expected earnings per share of $12.21. Sales increased to $2.64 billion from $2.59 billion, in line with estimates. Same-store sales rose a better-than-expected 2.7%.

Jewelry & Luxury

EBay will now authenticate luxury jewelry items

EBay announced it’s expanding the capabilities of its eBay Authenticate service — its luxury goods verification program — to now include luxury jewelry. Timed to coincide with the launch, eBay is also listing more than 45,000 luxury jewelry items for sale, including both diamonds and other gemstones that have been verified by professional jewelers. The eBay Authenticate service first launched just over a year ago, as a means for eBay to better compete with the growing number of luxury goods resale sites like The RealReal and others, which verify sellers’ goods as authentic, so shoppers can feel comfortable buying.

Signet Fixes Possible Security Issue on Kay and Jared Sites

Signet Jewelers has fixed a possible security issue on its Kay and Jared e-commerce sites, which risked exposing some its customers’ personal information. This week, cybercrime blog Krebs on Security reported it had been contacted by a Jared customer who complained that he could see other customers’ order information when he modified the address on his confirmation email. That info included the customers’ order, name, address, and the last four digits of their credit card.

Dept. Stores Ramping Up Discounting in Q4, Signet Says

Signet Jewelers Ltd. had a stable but not outstanding third quarter and said it is going to have to discount more heavily to compete with department stores in the fourth quarter.

The jewelry retailer’s same-store sales grew 2 percent year-over-year in the period ended Nov. 3. Total sales inched up 3 percent at both actual and constant exchange rates to $1.19 billion, and the company raised its full-year same-store sales outlook to $6.26 to $6.31 billion, with comps flat or increasing 1 percent.

 

Office & Leisure

Office Depot turns its empty retail space into WeWork-like office rentals

Office Depot recently posted positive earnings for a second quarter in a row—a sign of life for a retailer that’s been crushed under stiff competition from Amazon. The reason? Not thinking like a retailer. CEO Gerry Smith very deliberately touts his company as an omni-channel provider of business services—marketing, administrative, and technical—all under the umbrella of its Workonomy platform. Now, the company is attempting to nudge its way into the shared workspace economy with the Workonomy Hub, rentable desk and office spaces within Office Depot stores. The Workonomy Hub’s pilot location launched in Los Gatos, California, in August.  Office Depot wouldn’t share specific membership numbers, but their prices are competitive—a dedicated desk or a private office goes for $400 and $750 per month, respectively, compared to $475 and $700 per month at nearby WeWork spaces in San Jose.

Martha Stewart Plans Flowers Subscription Line

The Martha Stewart brand has paired with floral subscription service BloomsyBox.com for a new subscription line of flowers. Sequential Brands Group oversaw the deal. The initial collection features roses and is available in three bouquet options (small, medium and large), as well as in gift options. In 2019, The Martha Stewart brand and BloomsyBox.com will expand the range with additional floral varieties. “Every rose variety that Martha Stewart carefully selected for this collection delivers on her unique ability to create, inspire and educate through beautiful farm-fresh flowers,” says Juan Palacio, founder and chief executive officer, BloomsyBox.com. “We look forward to providing our customers with a high-quality subscription experience paired with Martha’s unrivaled expertise for years to come.”

A $500 device helps a mom and pop toy shop find customers on Google

Talbots Toyland used to buy full-page newspaper ads during the holiday shopping season and hope for the best. Now the San Mateo, California, store is connecting with Bay Area toy shoppers on Google’s search engine and attracting customers it might otherwise have never found. Google for years has offered tools to help small merchants increase their online visibility, but only if those retailers had digital records of what was on their shelves. Like many small businesses, Talbots lacked digital records of what was in stock and never got around to building one for its mammoth inventory of 65,000 products. Then last year the store purchased three devices from Pointy, a Dublin startup that helps independent merchants increase their visibility online and lure consumers who otherwise would shop at EBay or megaretailers like Amazon.com and Walmart, which have entire teams dedicated to being visible online. The $500 device plugs into a cash register and, using each item’s bar code as employees ring up sales, creates a digital inventory that is posted online and visible in Google searches along with the retailer’s location.

Technology & Internet

Consumers want fast free shipping, but that isn’t cheap to provide

Getting shoppers’ online orders delivered to their doors isn’t cheap, but it’s increasingly essential as many consumers have come to expect fast and free shipping. There’s a simple reason such a large share of merchants offers free shipping: Consumers expect it. Compared to the previous year, 94.8% of online shoppers received free shipping from a retailer, according to a July Internet Retailer survey of 1,105 consumers conducted by Bizrate Insights. However, the offer of free shipping is no longer enough for a growing number of consumers who also expect their packages to be delivered quickly.

 

Trump still wants USPS to raise Amazon’s shipping rates

President Donald Trump’s administration is recommending the U.S. Postal Service raise prices for shipping packages, a move that would hit online retailers such as Amazon.com. A commission Trump appointed released recommendations for the rate hike Tuesday. Trump appointed the panel after repeatedly criticizing Amazon, which he has accused of bilking the Postal Service. The proposed rate would affect most commercial shippers. Postal Service representatives denied it was losing money on shipping packages for Amazon.

 

NuOrder gets $15 million to push ‘wholesale disruption’

Since launching in 2011, NuOrder Inc., a provider of e-commerce technology that connects brands and retailers, has seen $16 billion in gross merchandise sales transacted on its platform. But in a display of how fast its business has recently surged, half of that volume occurred in the past year. NuOrder announced last week that it has reaped $15 million in a Series C round, bringing its running total to $40 million. NuOrder provides an e-commerce portal platform where its 1,000 client brand vendors can sell their products through branded online catalogs and mobile apps to a universe of some 435,000 participating buyers at retailers. NuOrder, whose services are free to retailers, charges brands an annual fee based on the volume of their wholesale business.

 

Fanatics plans to launch esports gaming apparel

Fanatics Inc., the world’s largest seller of licensed sports apparel, is branching out into competitive video gaming, a bet that esports is reaching a new level of mainstream appeal. The company is teaming up with Overwatch League, the esports organization launched last year by publisher Activision Blizzard Inc. In the first major retail partnership for an esports league, Fanatics will manufacture and sell Overwatch products around the world. It also will run the online shops for the league and its teams. For Overwatch followers, the deal will bring a significant expansion of fan gear like jerseys, T-shirts and hats. Through the Fanatics memorabilia arm, the league also will introduce collectibles, autographed products and game-used items for fans.

 

Finance & Economy

Stocks are plummeting, but a U.S. recession doesn’t look imminent

Alarm bells sounded on Wall Street last week as something happened that hasn’t occurred in a decade: The U.S. yield curve inverted. This is one of the most reliable predictors of a recession, and it spooked investors enough to send the Dow down almost 800 points (along with the realization that President Trump’s trade “deal” with China is flimsy, at best).  But this doesn’t mean a recession is happening tomorrow or even in 2019.  Roughly 70 percent of the U.S. economy is powered by consumer spending. As long as consumers are happy and opening their wallets, the economy will keep growing, and right now, consumers are in very good shape.

US household wealth jumps $2T

A stock market rally, which has since reversed, propelled U.S. household net worth to a record high of $109 trillion in the July-September quarter.  The Federal Reserve said that the value of Americans’ stock and mutual fund holdings soared $1.2 trillion. Home values rose $200 billion. Other assets, such as bank accounts, also increased. Total net worth climbed $2 trillion from nearly $107 trillion in the April-June quarter.  Greater household wealth can help the economy by lifting consumer spending. Yet wealth has been increasingly concentrated since the Great Recession, with just 10 percent of the U.S. population owning 84 percent of stocks.

Consumer debt on track to top $4 trillion by 2019

Here’s an unsettling number as you gear up for holiday shopping: consumer debt is on pace to hit $4 trillion by the end of 2018. In fact, in just the past five years, consumer debt has gone up by $1 trillion.  Taking a closer look at the breakdown for borrowers: $1.04 trillion is revolving or credit card debt, which has jumped 22% since 2013, and $2.9 trillion in non-revolving debt, which includes student and auto loans, jumping 30% in the past five years. (Mortgage debt is not included in this number.)