We knew as much from the earlier University of Michigan survey, so yesterday's release of the September consumer confidence index from the Conference Board was more confirmation than news. A few details:
The Conference Board Consumer Confidence Index, which had rebounded in August, plummeted in September. The Index now stands at 86.6 (1985=100), down from 105.5 in August. The Present Situation Index decreased to 108.9 from 123.8. The Expectations Index fell to 71.7 from 93.3 last month...
“Hurricane Katrina, coupled with soaring gasoline prices and a less optimistic job outlook, has pushed consumer confidence to its lowest level in nearly two years (81.7 in October 2003) and created a degree of uncertainty and concern about the short-term future,” says Lynn Franco, Director of The Conference Board Consumer Research Center. “Historically, shocks have had a short-term impact on consumer confidence, especially on consumers’ expectations. Fuel prices remain high, though they have retreated in recent days, and when combined with a weaker job market outlook, will likely curb both confidence and spending for the short-run. As rebuilding efforts take hold and job growth gains momentum, consumers’ confidence should rebound and return to more positive levels by year-end or early 2006.”
That's an interesting statement. It suggests that the Conference Board itself thinks that folks in the survey are not all that forward-looking. The predictive powers of consumer confidence measures remains a source of controversy, but there isn't much doubt that folks are feeling nervous. But it's not just the U.S. consumer feeling the blues. From Bloomberg:
Confidence among French executives and German consumers declined in September, the latest evidence that near-record oil prices are threatening the outlook for economic growth across the dozen-nation euro region.
In the opposite corner, European businesses appear to be feeling much better, thank you:
In Italy, Europe's fourth-largest economy, business confidence unexpectedly rose to a 10-month high in September, the Rome-based Isae Institute's said...
Business confidence in Germany, Europe's largest economy, unexpectedly rose to an eight-month high in September as the euro's 11 percent decline against the dollar this year made the country's goods cheaper abroad, the Munich-based Ifo institute said yesterday.
I'm not sure what to make of the divergence in business and consumer views. Today's report on August durable goods orders in the U.S. is doesn't suggest that American businesses are feeling some love too. From MarketWatch:
Total durable goods orders rose 3.3% in August, the Commerce Department reported Wednesday. It was the fourth increase in the last five months and the largest gain since May.
The increase was much larger than Wall Street economists were predicting. Economists were expecting durable goods to rise 0.9% in August...
Orders in July were revised to a 5.3% decrease from 4.9% previously estimated.
A key measure with the report, non-defense capital goods rose 4.3% last month after falling 7.1% in July. Excluding aircraft, this subset of data rose 3.6%.
Some may view yesterday's report on existing home sales in the U.S. as a sign that the consumer's are giving the truer signal, States-side at least, but the New York Times provides some welcome perspective on that report:
...the Commerce Department said new home sales fell 9.9 percent, to an annualized pace of 1.24 million, from a record-setting July, and were at their slowest pace since January. There was a 4.7-month supply of homes on the market in August, up from a 4.1-month supply in July. The median sale price, however, rose 2.5 percent, to $220,300. Economists had been expecting an annualized pace of 1.35 million new home sales.
By comparison, the National Association of Realtors said Monday that existing home sales rose 2 percent, to an annual rate of 7.29 million, in August and the median sale price hit a record of $220,000, up 15.8 percent from a year earlier. Existing homes make up about 85 percent of all home sales."You shouldn't think that this is a sign of apocalypse now, that things are collapsing on us," Anthony Chan, an economist with J. P. Morgan Chase, said of the new home sales data. "This is clearly not that. When I look at these numbers, I see that this is a year that most Realtors would be proud of."
Overall, not much reason to run for the exits yet, I think.
Related posts from blog-buddies:
The Skeptical Speculator covers these reports, and yesterday's speech by Chairman Greenspan too.
The Capital Spectator says the data is "less than conclusive."
The Housing Bubble 2 highlights the new home sales report. The Eclectic Econoclast has a look at the consumer confidence report and thinks the "housing bubble seems on the verge of breaking." Calculated Risk has a similar opinion, and makes his case with lots of nice pictures.
UPDATE: At A Few Euros More, Edward Hugh notes that the positive reading on German business confidence may not fully reflect the impact of the elections. Barry Ritholtz suggests care in using the consumer confidence numbers.