Well, it’s official, the economy is not fixed. We continue to hear from the Fed’s that “the economy is fixed but it is going to take time” or my favorite “we have saved or created thousands of jobs.” Well I am not sure how you could say you have created jobs when the numbers do not bare this out. Also if this is the Fed’s way of saving or creating jobs then we need a new plan.
The Consumer Confidence Report came in this morning and it came in low at a 47.7. The estimated figures were 53.5 and the prior actual figure 53.4. The impact on the Bond Market is positive as rates have improved today. The big picture is not so good as clearly there will be more jobs lost in the coming months.
What is the Consumer Confidence Report?
This survey measures the level of confidence individual households have in the performance of the economy now and in the future. It is a leading indicator of future spending and the business cycle. 5000 consumers in the nine census divisions across the country are surveyed each month. The level of consumer confidence is directly correlated to the strength of consumer spending, which accounts for two-thirds of the economy.
It also correlates closely with joblessness, inflation, and real incomes. Only index changes of at least five points should be considered significant. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. Note, changes in consumer confidence and retail sales do not move in tandem month by month. If the economy experiences a long-term expansion, buying intentions may decline even while the jobless rate declines because of the satisfaction of pent-up demand.
Conversely, if inflation begins to accelerate, spending plans may increase for the short-term as consumers buy now to avoid having to pay higher prices later. Regional differences in consumer confidence are an indication of differing business cycles across the nation. This has implications for spending on durable goods and, more importantly, for residential real estate markets. Financial markets interpret rising consumer confidence as a precursor to higher consumer spending. Higher consumer spending could in turn spark inflation.
Look for a change in the direction of the six month moving average of the index. Consumers do not usually have the necessary information to accurately assess income and job growth six months in the future. The report provides information on planned spending, which does not necessarily turn into actual spending, although it is unlikely that increasing consumer confidence would be followed by a decline in spending. The Consumer Confidence survey is not useful for any type of forecasting. The Consumer Confidence survey is scheduled for released at 9:00 (CST) on the last Tuesday of the month by the Conference Board.