The latest retail sales data is set to be released on Thursday with investors watching for indicators on the health of the consumer and the overall economy. The data comes just after a recent New York Federal Reserve survey showed consumer delinquency rates reached their highest level since 2020.

Citi senior global economist Robert Sockin and Strategic Resource Group managing director Burt Flickinger join Morning Brief Hosts Seana Smith and Brad Smith to discuss why consumer spending data is so important.

Sockin explains that the retail sales report is “a very important figure because what we've seen is the US consumer has been the backbone of this recovery. US consumption has greatly outperformed other developed markets. It's a major reason the economy has been so resilient throughout this cycle.”

“We've seen retail sales surprise to the upside in recent prints. So I think it's a very important report because it's a read on the health of the consumer, which is what's supporting this economy. And additionally, if data continues to surprise to the upside in the report, it would go a long way in helping support the narrative of a soft landing," he continues.

Flickinger notes that despite consumer spending holding strong, the rise in consumer delinquencies tells a different story. “It's like Charles Dickens and 'The Tale of Two Cities.' It's the best of times on Wall Street [and] it's the worst of times on Main Street [with] 65% of all consumers living paycheck to paycheck.” He highlights that consumer delinquencies are expected to reach 14.3% in the next 90 days compared to only 7.1% before the COVID-19 pandemic.

"While spending has been strong in some retail, it's strong in food retail like Kroger (KR), Costco (COST), [and] Walmart (WMT) it's good and off-price [like] TJX (TJX),” but it's weak in other areas like home, furniture, electronics, and other retail spending categories. Flickinger says the consumer is "telling us, regardless of whomever wins the election, the consumer is cautious.”

Sockin notes that current conditions are hitting consumers of varied income levels in different ways: “There's no doubt that we are seeing differences along the consumer spectrum in terms of the amount of strain they felt in this cycle. Lower-income consumers have been showing heightened strains for the last few years compared to higher-income households… I think those strains are likely to be helped by the Fed cutting rates."

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This post was written by Naomi Buchanan.