Consumers regaining confidence

Hopefully everyone had a relaxing Memorial Day. Yes? Travel? Barbecues? Hockey playoffs? Basketball playoffs? Whatever it was that you did, according to the Conference Board you did it more confidently!

Consumer confidence, that all-important measure of the mood of the American rose super significantly in the month of May. Confidence rose from a very low 40.8 to a whopping 54.9. What’s more expectations for future economic activity in the next 6 months rose from 51.0 in April to 72.3 in May. Needless to say, but I will say it anyway, this bodes well for the future of the economy. Hopefully regular readers of ze blog have begun to see how much of our economy has nothing to do with economic policy, but has to do with how we all feel about our worlds as people, yes? If we feel good then we spend and we make choices about our futures that involve some risk (such as changing jobs, building an addition, etc.). When those things are in place then the economy normally does very well because consumers make up 66-70% of GDP.

Not surprisingly the various stock markets roared back to life. The thing to note will be the monthly retail sales numbers from the various retailers. That is, has this renewed confidence of consumers begun to translate into more spending on the part of consumers? If so, then the recession is close to being over.

Perhaps lost in the froth over the consumer confidence number was that home prices, as reported by the Case-Shiller home price index, fell by over 10% in 15 of 20 major markets in March. Overall, home prices fell by 19.1% in the first quarter of 2009. Why might the market have overlooked this troubling data? Because this is a lagging indicator, backward looking in its nature. Everyone knows the first quarter…how to put this…sucked! Whereas, consumer confidence is a harbinger of future spending. Nonetheless, the economic data is still coming out mixed. To me that indicates we are still in a recession. However, it also seems as if we are emerging from it slowly. I’ll keep paying attention for all of us.

I hope that you all have excellent days!

Jason