Wikinvest Wire

Consumer confidence soars

Tuesday, May 26, 2009

Reuters reports on the sharpest increase in U.S. consumer confidence in more than six years. But, don't get overly excited (like the stock market currently is), the American shopper is still quite depressed by historical measure.

The Conference Board, an industry group, said on Tuesday its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003. Economists had been looking for a much smaller rise to 42.0.

Fewer Americans said jobs were "hard to get," the survey found, with that measure slipping to 44.7 percent from 46.6 percent. Those saying jobs were plentiful climbed to a still meager 5.7 percent, but that was still higher than April's 4.9 percent.

"Consumers are considerably less pessimistic than they were earlier this year," said Lynn Franco, director of The Conference Board's Consumer Research Center.
Once again, less bad is the new good, the "considerably less pessimistic" assessment being cause for some to get out the bubbly and celebrate, at least for a little while.

More details...
The survey offered mixed messages regarding Americans' propensity to spend money. The proportion of those who said they planned on buying a car over the next six months rose to 5.5 percent, its highest in at least a year.

But fewer intended to buy homes -- only 2.3 percent, a tough break for one of the hardest hit sectors in the country's economic crisis. A separate report on Tuesday revealed U.S. home prices dropped 18.7 percent in March compared to a year earlier.
Here's a graphic from the Wall Street Journal showing how the expectations index has surged past the present conditions index in a manner similar to the 2003 bottom.
IMAGE Since confidence had sunk to such historic lows in recent months, like many other economic indicators, comparing recent developments to patterns seen in previous recessions may not provide all that much relevant insight.


Anonymous said...

Headline should read:

"Consumers are incredibly stupid and their confidence grows automatically with the addition of warmth and sunshine."

Vespucian said...

I have a strong suspicion that there is some equivalent of "hedonistic adjusting" going on here. It doesn't make sense.

Anonymous said...

And of course, more slightly more people could be planning on buying a car figuring that with two automakers almost bankrupt and closing out half their dealerships that there's probably some crazy bargains out there...

Funny how all major indices went up almost in tandem at 10am EST, no?

Ed said...

iTulip has a great post up right now that the consumer confidence survey doesn't actually mirror purchasing trends, but rather the DOW. So if the stock market is up , 'consumers' report better numbers, even if they're not actually buying more or acting more confident.

Michael said...

A true measure of consumer confidence would be the market seeing the consumer SPENDING money! Consumer confidence is better called consumer hopes. With job loss most likely increasing in the next quarter substantially....who will be buying?

bruno t said...

44.7% vs 46.6%. 5.7% vs 4.9%. I guess the authors haven't heard of the concepts of "margin of error" in statistics. If you sampled a few hundred or even a few thousand folks and extrapolated that to 300M, would you bet your life your numbers were accurate to within 1%? I'm guessing most rational people would not.

And remember, when the DOW was at 14,000, those people were "optimistic" too. How'd they do as prognosticators of the future?

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