Regarding Consumer Confidence from today's Savvy Trader commentary:
Consumer (no)-Confidence dropped over 10 points. So how does it happen that this index is so much weaker than the the University of Michigan Consumer Sentiment Survey?
It turns out, like any other survey, it has to do with what is asked. The Conference Board's Consumer Confidence survey explicitly asks about the labor market and business conditions, while the University of Michigan survey asks about financial well being and buying plans. Also, the Conference Board survey looks out 6 months while the University of Michigan survey looks out 1 to 5 years. Consumers seem to believe that the economy will recover with the longer time span.
The decline in consumer confidence is very much like the decline we saw when Iraq invaded Kuwait in August of 1990. At that time the economy was close to a recession, which did come by the third quarter of 1992. After the initial drop in consumer confidence in August 1990, confidence dropped more than 30 additional points, as the economy remained weak following the end of the war. There are a few differences that make this time around different, this time there is little inflation and unemployment is not expected to climb as high. However, this time the war, and how to fight it, isn't as clear, and there is much more fear in the public. Don't be surprised if we see a deeper drop in consumer confidence. But, a bit of good news...
In January 1991 when we engaged the Iraq's, the stock market started up, despite a still weakening economy.
Sam
savvy-trader.com |
