Not surprisingly, June consumer confidence declines

Hello folks!

Consumer confidence fell very sharply in the month of June according to the Conference Board, the compilers of the information.  Specifically it fell to a 52.9 reading from May’s revised figure of 62.7.  This result was almost ten points below economists expectations of 62.5.

Analysis: I am surprised by the magnitude of the decline, but I am not surprised that consumer confidence fell in June.  The reason, as I mentioned just yesterday prior to the consumer confidence release, is that most of us look at the performance of the stock market as a harbinger for future economic growth.  And May saw a very terrible stock market performance.  Not only that, but the media was full of reports of impending economic doom in Greece that might collapse Europe that might collapse the whole world.  Consumers are lagging economic indicators as most of them assess situations after the fact and not before the fact. 

However, the size of the decline does not auger well for the economy.  When consumers are spooked, they don’t spend money.  When they don’t spend money, the economy falls.  When the economy falls they get more spooked.  A bad vortex to be in.

What could snap the U.S. consumer out of his or her phunk?  Lots and lots of good news.  Slow and steady good news.  A diminishment of bad news.  Signs of hiring by U.S. businesses.  Getting the friggin’ Deep Horizon well plugged.  Etc.  Unfortunately, fear begets more fear.  This situation is getting tricky and difficult to manage solely through political means.  Most of us don’t want just another “Feel Good” piece of political policy – we want real and meaningful change.

Fortunately, the new financial industry overhaul bill will ultimately massively limit economic bad news from malfeasance.  But because the details of the bill are so abstract, the results simply provide a framework for clean dealing.  The bill itself is not the sort of good news that gets grandma out to Wal-Mart to buy a new sun hat.  So it looks like the economy is going to continue to skitter along for awhile longer.  Let’s hope that those bloody Europeans can manage themselves while the U.S. consumer rediscovers his/her mojo.

Importance grade: 10; the U.S. consumer drives the world economy.  That he/she is scared is not a good thing.  However, the U.S. consumer is also not a leading indicator and is also very sensitive to sensationalism.  If there is a wave of good news, then the U.S. consumer will rebound fairly quickly.  Maybe the U.S. Congress can vote that every football team in the U.S. gets to win the Super Bowl at least once this year.  Barring that, we are likely in for a bumpy ride.

Jason