Good morning! Keep an eye for July’s PCE data due at 8:30 a.m. ET this morning. Market folks call this one the Fed’s preferred inflation gauge.

Analysts expect the headline figure to hold steady at 2.5% annually, while core PCE — which strips out energy and food — is seen inching higher from 2.6% to 2.7%. 

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Private vs. public sector signals

No single indicator should tell the entire story of a complex economy.

It’s worth unpacking, however, when signals from the public and private sectors are pointing in opposite directions.

On Thursday, the Bureau of Economic Analysis reported that the US economy grew at a slightly stronger clip than previously thought.

US GDP rose at 3.0% annualized in the second quarter, revised from the previous estimate of 2.8%. 

A driver of that strength, according to the government, was robust consumer spending.

The initial 2.3% print for consumer spending was revised higher to 2.9%.

The economic data published right as Dollar General’s stock kicked off its worst day ever. Shares plunged 32% Thursday for its largest drop since its 2009 IPO.

The budget retailer slashed its expectations for sales the rest of the year, citing concerns around economic growth and — you guessed it — consumer spending. 

Painfully high prices for goods, rent, and healthcare have weighed on everyday Americans. 

“Inflation has continued to negatively impact these households, with more than 60% claiming they have had to sacrifice on purchasing basic necessities,” chief executive Todd Vasos said on a call with shareholders and analysts.

The company previously forecasted comparable sales to climb as much as 2.7% for 2024. Executives have since revised that down to between 1% to 1.6%. 

Shares of competitor Dollar Tree also tumbled 10% on the news. 

“Dollar General’s reduced forecasts for full-year revenue, same-store sales and diluted EPS may indicate its back-to-basics plan isn’t yet resonating enough with lower-income households that remain financially constrained,” said Bloomberg Intelligence analysts Jennifer Bartashus and Jibril Lawal.

To be clear, comparing a GDP report with one company’s earnings outlook is not an apples-to-apples comparison. Plus, GDP is backward-looking, while Dollar General’s view looks forward.

Nonetheless, it highlights the disparity between the official and anecdotal, as well as public and private. 

Notably, too, the Dollar General outlook is built around the behavior of consumers with more limited budgets.

One other conclusion, then, is that lower-income Americans currently have a bleaker economic outlook than the typical household might. 

Which of these indicators do you put more weight on when thinking about the state of the economy? Hit reply to this email or let me know on X @philrosenn.

Elsewhere:

📈 The Dow notched another record. Stocks shrugged off Nvidia’s stock slump and Thursday brought the Dow its third all-time high this week. Markets reacted following the upbeat GDP data and weaker-than-expected weekly jobless claims. (Yahoo Finance)

💰️ Nvidia could help fund OpenAI. The chip giant — which has seen its stock surge since OpenAI released ChatGPT — is reportedly in talks to join the startup’s latest funding round. Apple and Microsoft have also been rumored to be participating. OpenAI is currently eyeing a $100 billion valuation. (Bloomberg)

🖥️ Dell beat earnings estimates. AI server sales surged 80%, and total revenue jumped 9% to $25 billion. The PC maker reported a sales backlog of $3.8 billion with plenty of deals waiting to be cashed in, according to executives. The stock is up 45% in 2024. (CNBC)

Rapid-fire:

• Ulta Beauty cut its annual forecast as execs see slowing demand for cosmetic products (Reuters)

• Lululemon also slashed its outlook for the year as it, too, sees lukewarm demand for its shoppers (Reuters)

• Nvidia’s growth metrics aren’t impressing Wall Street like they used to and it’s only going to get harder for the company to meet expectations (Yahoo Finance)

• America’s big cities are losing their stark pay advantage over smaller, more suburban towns (Business Insider)

Last thing:

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