Consumer Confidence Lowest in Nearly 16 Years

Posted by Louis Navellier on 5/27/08 12:40 pm

The Conference Board’s Consumer Confidence Index fell to 57.2 in May from 62.8 in April.  The drop was significantly more than expected (60.0), and the index is now at its lowest level since October 1992.

The consumer expectations component of the index dropped to an awful 45.7, a level that is consistent with real consumption falling at a 2.5% year/year rate.  Anything close to this would be disastrous for the overall economy, since consumers represent about 70% of economic growth.

Interestingly, consumer stocks rallied on the news today.  This is nothing more than investors rolling the dice on stocks with poor fundamentals or bottom fishing--a very dangerous sport indeed.

Many of these gamblers are likely betting that tomorrow’s chain-store sales result will reveal that consumers who recently received tax-rebate checks did some heavy shopping, but keep in mind that tomorrow’s result is for the week ending 5/24/08.  We will have to wait until next Tuesday to see shopping results for the Memorial Day holiday.

Nonetheless, if we see a meaningful uptick in tomorrow’s chain-store sales results, the market will assume that next week’s release will be of the same nature.

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