Bank of America: Consumer Spending Drops in September Lombardi Letter 2016-10-13 11:10:57 BAC Bank of America NYSE: BAC iphone7 Apple In the midst of Apple's major event Bank of America finds no major rise in iphone 7 sale News

Bank of America: Consumer Spending Drops in September

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BofA Sees No iPhone 7 Bump

For several months now, Bank of America Corp (NYSE:BAC), commonly referred to as BofA, has been releasing statistics on how much people are spending on their debit and credit cards. Investors began using the bank’s statistics as a forecasting tool after BofA accurately predicted government statistics on consumer spending.

The metric’s clairvoyance on how much people are buying is uncanny. It has been proved over several months, which is what makes the recent data noteworthy. There is a sharp slowdown in certain quadrants, a fact that runs counter to the narrative of an improving economy.


It’s not just one data point either.

“The BAC aggregated card data showed that retail sales ex-autos declined 0.1% mom SA in August,” wrote Bank of America analysts last month. “This follows the 0.3% mom decline in July and pushes the 3-month average down to -0.2% mom.” (Source: “Consumer Spending Deteriorates In September; BofA Finds No iPhone 7-Linked Sales Jump,” Zero Hedge, October 12, 2016.)

Official government statistics later corroborated those numbers. Although those same BofA numbers got a slight bump in September, suggesting a reversal from the previous two months, there are reasons to believe it is a one-time aberration.

The analysts warn not to be fooled by optimistic data, because “given that part of the pickup owes to gasoline and building materials, we think the risk is that core control sales (retail ex-autos, gasoline and building materials) are softer.” (Source: Ibid.)

Moreover, there was no spectacular bump in electronics spending.

Plenty of analysts were hoping the release of the “iPhone 7” would unlock a tidal wave of consumer dollars. The embers of hope were kindled by reports from Sprint, AT&T, and T-Mobile that said iPhone 7 sales were crushing last year’s demand for the “iPhone 6.”

Those leaked reports raised expectations across the board, although overall smartphone demand was unlikely to increase alongside demand for the new iPhone. In particular, a sweeping recall for incendiary Samsung Electronics Co. Ltd. phones may have put a damper on consumer appetite for new phones in general.

Regardless of the reason, there was no positive indication of an iPhone 7 surge. The overall trend in consumer spending, barring this month’s misleading uptick, is to the downside.

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