Latest economic data tells us not much

You may have noticed that I have not been posting as frequently to the blog of late.  The reason is that the economy has remained in a consistent pattern of slow revenue growth, slightly faster profit growth, and hovering unemployment data.  There was a moment heading into last spring in which I would give weekly updates on economic data, but frankly very little of it has swayed from the above characterization.  So you know, I am still tracking numbers from the economy.  The latest…

Home prices in May rose both on a month over month basis, and on a year over year basis.  That is, May’s sales were higher than April’s by 1.3% and they were higher than those of the year prior’s month off May by 4.6%.

Separately, that grand daddy of all economic statistics, consumer confidence, fell in July to a level of 50.4.  This number was only slightly less than the consensus forecast of 50.8.  The July level is the lowest since February’s 46.4.

Analysis: As you can see we have one sign of economic health – the rise of home prices, and one statistic indicating economic stagnation – consumer confidence.  What’s interesting to me is that for home prices to rise consumers have to be buying those houses and a home is the largest purchase that most people ever make.  So consumers are buying, but they don’t feel very good about it.  To me this is very telling and potentially hopeful.  Why?

As you can see from the data, the consumer confidence number is very volatile.  In February it was at 46, then it was up to post-recession highs and now it is back down again.  All of this volatility has happened in an economic climate that has actually been stable.  So why the volatility?  What has been volatile is the news around the economy and its prospects.  Especially those wily Europeans and their banking and debt woes.  But that news is largely behind us.  So will the consumer confidence volatility work to our favor?  I think so.

Because it is an election year count on the Obama Administration and Democrats and Republicans to start listening to and paying attention to the consumer.  There will be all sorts of proposals that will sound good to consumer ears.  Corporate profitability is slowly getting stronger.  Hiring is likely to follow.  The stock markets will likely rise.  And the consumer’s frown will turn to a taciturn grimace.  Believe it or not, that is a good thing.

Importance grade: 4; 10; the 4 is for the home price data.  At the end of the day, the economy is much more than just home price data.  However, folks are buying houses and they are bidding up home prices above what they were even just several months before.  The 10 is for the consumer confidence data.  Like it or not, our economy is still dependent on John and Jane Doe opening up their wallets for stuff.  Depressed consumers do this less often.  My feeling though, is that the consumer confidence data for August will stabilize.  From there I am guessing that there will be a marginal increase, followed by steady gains.

Jason