Dec 132014
 December 13, 2014  Posted by at 6:38 pm Finance Tagged with: , , , , ,

DPC “Grant’s Tomb. Rubber-neck auto on Riverside Drive, New York” 1911

Hey! Who said economics can’t be fun?! How is it not absolutely brilliant that in the face of a collapsing shale oil industry – or at least, for the moment, of its financing model -, and the worst week for the Dow since 2011, the Thomson Reuters/UofMichigan consumer sentiment index shows American consumers are more optimistic than they’ve been in 8 years, and that “more consumers volunteered good news than bad news than in any month since 1984”? 1984! How does one trump that as a contrarian signal? And that I don’t mean to sound funny: that is serious.

Of course it says something too about US media and their incessant messages about how well everything is going and how we’ve passed that corner the recovery was always just around, and what a boon the falling oil prices will be to spending over the holidays, and even if sales instead fell over Thanksgiving; surely that’s only because people were saving up their newly found extravaganza for the Christmas season. And obviously the Fed-sponsored distortions of all asset prices on the planet, homes, stocks, you name it, have a lot to do with stoking that optimism as well.

But the feat stands on its own two feet just as much. Americans are not just behind the curve, they positively confirm a top has been reached. If ever you needed a sign, here it is: “Their expectations run quite counter to recent price data.” That’s from Jason Lange for Reuters, but before he gets around to that, check out what some of the experts he cites have to say:

After Years Of Doubts, Americans Turn More Bullish On Economy

Pessimism and doubt have dominated how Americans see the economy for many years. Now, in a hopeful sign for the economic outlook, confidence is suddenly perking up. Expectations for a better job market helped power the Thomson Reuters/University of Michigan index of consumer sentiment to a near eight-year high in December, according to data released on Friday.

U.S. consumers also saw sharp drops in gasoline prices as a shot in the arm, and the survey added heft to strong November retail sales data that has showed Americans getting into the holiday shopping season with gusto. “Surging expectations signal very strong consumption over the next few months,” said Ian Shepherdson, an economist at Pantheon Macroeconomics.

While improvements in sentiment haven’t always translated into similar spending growth, consumers at the very least are feeling the warmth of several months of robust hiring, including 321,000 new jobs created in November. When asked in the survey about recent economic developments, more consumers volunteered good news than bad news than in any month since 1984, said the poll’s director, Richard Curtin.

Moreover, half of all consumers expected the economy to avoid a recession over the next five years, the most favorable reading in a decade, Curtin said. The data bolsters the view that the U.S. economy is turning a corner and that worker wages could begin to rise more quickly, laying the groundwork for the Federal Reserve to begin hiking its benchmark interest rate to keep inflation from eventually rising above the Fed’s 2% target.

Overall, the sentiment index rose to a higher-than-expected 93.8, mirroring levels seen in boom years like 1996 and 2004. Many investors see the Fed raising rates in mid-2015, and policymakers will likely debate at a meeting next week whether to keep a pledge that borrowing costs will stay at rock bottom for a “considerable time.” Consumers see faster inflation ahead. Over the next year, they expect a 2.9% increase in prices, up from 2.8% in November, according to the sentiment survey.

Their expectations run quite counter to recent price data. The Labor Department said separately its producer price index dropped 0.2% last month, brought lower by falling gasoline prices. Prices were soft even excluding the drag from gasoline. U.S. stocks briefly cut losses after the buoyant sentiment data but stayed lower on the day as investors fretted about declining oil prices and what that said about global demand.

About those recent data, the New York Times says:

Inflation has been below 2% for most of the last two years, and falling gas prices could drive it even lower. Partly because of cheaper gas, the Consumer Price Index was unchanged in October from the previous month. Compared with 12 months earlier, consumer prices were up just 1.7%.

I think maybe I should just leave it at this. The American consumer has spoken, and (s)he’s called a top. Whether that’s just the top in consumer sentiment or also one in the stock markets, let’s see, but I lean towards thinking both is a realistic option, because of the way energy credit fell to pieces in no time. It looks like a harbinger for a – much – wider segment of the economy, and it feels like something’s profoundly broken.

Home Forums The American Consumer Calls The Top

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    DPC “Grant’s Tomb. Rubber-neck auto on Riverside Drive, New York” 1911 Hey! Who said economics can’t be fun?! How is it not absolutely brilliant that
    [See the full post at: The American Consumer Calls The Top]


    For the most part the concon number reflects the stock market. People have been well trained to equate the stock market with the economy. 07 and 08 was an anomaly when stocks were strong and concon sank.

    This is a month old but still applies.
    Concon has been in a downtrend for 14 years

    For Whom The Consumer Confidence Bell Tolls

    To be perfectly fair we are now just above the down sloping trend line connecting the highs. I’m not sure that the concon numbers actually contain any information however. It’s just a sort of derivative of feelings. Feelings and expectations do not move the economy, money does.


    In the above post the chart was of the Conference Board’s concon survey, in October. All the excitement now is about the University of Michigan/Reuters survey for November.

    I looked up the Conference Board’s November report and dang if it did not fall from 94.1 to 88.7.

    Ken Barrows

    Americans are quite confident that the USA’s waste-based economy can continue for quite some time. And they probably assume that the extraction of oil is basically a cost-free activity.


    rapier, it’s funny how consumer confidence differs from consumer sentiment, isn’t it?

    Dr. Diablo

    Except that in an economy where everything is a lie, I don’t believe a word of it.

    Consumers are apparently so confident Christmas shopping is down 11%? When gas has plunged 25%? So confident they continue to leave the stock market in droves as they cash out retirements to survive? So confident housing sales are remain low and are turning down? So confident in the job market that the participation rate continues to fall month after month, year after year, and hasn’t been this low since 1978? So confident that 1 in 5 Americans must have forgotten their situation is so fragile they’re on food stamps?

    No, somehow I’m guessing that the government may–just may–be bending the numbers a teeny little bit.

    It’s all about the narrative now: the narrative demands that interest rates rise, so some sort of facts needs to appear to justify what has already been decided. Is deciding your course ahead of time, regardless of or in defiance of the facts, considered insanity or stupidity?

    In any case, the one thing it isn’t, is reality. There’s no need to comment on facts or on news that are so eggregiously, so transparently false. Next time, ask the ConCon board to call zip codes outside of K Street.


    Consumer confidence? Another lying statistic compiled by a politically motivated State institution? And we are to fall for it?


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