Consumers are an Unhappy Bunch

Posted by Patrick O'Connor on 6/24/08 1:36 pm

The Consumer Confidence Index sank 7.7 points in June to 50.4, a 16-year low, and well below the 56.0 consensus.  The details were gruesome: current conditions index fell to 64.5 from 74.2 and expectations index dropped to 41.0 from 47.3.  The latter is the lowest reading since the survey began in 1967, and is “consistent with consumption falling at a 3% y/y rate,” said Ian Shepherdson at High Frequency Economics.  The worst quarter ever was -1.5% in Q4 1974.

The bottom line is the tax rebate checks are getting spent, but they’re failing to cheer up consumers as food and gas prices go through the roof, and home prices continue to fall rapidly.  The recent declines in the stock market are not helping either.

The Fed will not raise interest rates anytime soon.

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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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Consumer Sentiment Drops to 28-year Low

Posted by Patrick O'Connor on 5/16/08 12:12 pm

The University of Michigan Consumer Sentiment Index continued its rapid plunge since July 2007 by falling an additional 3.1 points in the first half of May.  The index is now at 59.5, its lowest level in 28years.

Scott Hoyt at Economy.com is particularly troubled by the result:

“This level of confidence is not only consistent with a recession, it is becoming suggestive of a severe recession.  The index was almost 4.5 points below the lowest level it reached in the recession in1990 and well below its lows this decade.”

Mr. Hoyt pointed out in his analysis that the government’s tax-rebate checks have not helped thus far.

“The continuation of the [Michigan index] declines despite the initial wave of rebate checks being sent to consumers is disconcerting.  With its emphasis on consumer finances, the Michigan index would have seemed to be the most likely to receive a lift from the stream of cash consumers are receiving.”

The Michigan index was affected a great deal by rising food and energy costs.  In fact, food prices are now up more y/y than energy!

All said, it does not look good for consumer spending near-term.  For the record, we are underweight consumer stocks and overweight energy- and food-related stocks, such as fertilizer companies.

Click on the consumer tags in the left column of the All Cap Blog’s main page where it says “popular tags” to see all posts related to consumers. 

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Consumer Confidence at 5-year Low

Posted by Patrick O'Connor on 4/29/08 9:28 am

The Conference Board’s Consumer Confidence Index dropped to a five-year low in April after home prices continued to plunge, gasoline prices hit fresh all-time highs, and jobs became less plentiful.  Confidence is now “consistent with real consumers’ spending falling at a year-over-year pace of about -2%,” said economist Ian Shepherdson at High Frequency Economics.

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