Consumer Confidence Disappoints

With a reading of 49.3, this morning’s Consumer Confidence report for the month of June came in six points below consensus forecasts, and it was the 13th weakest report compared to expectations since 1999. In the table below, we summarize the average and median performance of the S&P 500 and each of its ten sectors on the day of the release. Overall, the S&P 500 and its sectors have typically averaged positive returns on days of weaker than expected reports. However, in an environment where investors are clinging to 'green shoots' as a sign that the economy is improving, reports like this aren't what they want to see.

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Comments

[herbert hoover:]

This is hilarious. Disappoints? It must be nice to live in the NY-DC bubble. You guys have no idea what the real world is experiencing. Keep buying those stocks with triple digit RE ratios. Keep speculating in $80 a barrel oil. The rest of us coldn't care less. We cashed in our 401Ks to pay our mortgages.

Jun 30 11:29 AM

[Dave Wrixon:]

Just shows the expectations were unreasonable.

Jun 30 12:15 PM

[ken3602:]

You have to say EVEN consumer confidence turned its head down in June. We can see a pattern here. Every data peaked in April, stalled in May, and is beginning to deteriorating from June. What does this mean? Downturn will resume, and nobody knows how bad every part of ecomony will get this time.

Jun 30 12:23 PM

[conceptwizard:]

Already 15 states have emptied their unemployment insurance funds and have been compelled to borrow from the US Treasury in order to make monthly payments. By next year, it is anticipated that 30 states will have to borrow in the neighborhood of $17 billion to meet unemployment payments. The crisis is “setting the stage for big pressures for states to restrict eligibility and benefit levels,” warned Rick McHugh of the National Employment Law Project.

Unlike in many European countries, where unemployed workers can recuperate the majority of their lost wages through national insurance plans, in general, the average unemployed American worker receives at most half of his or her lost wages. In fact, many states have in place weekly caps on the amount that workers can receive.

While in Massachusetts an unemployed worker can receive at most $942 per week, in Arizona, the top weekly payout is $242, and in Michigan, $362. Most southern states have capped weekly benefits at under $300.

Many rules, moreover, make it impossible for workers to collect jobless benefits at all. In Michigan, for example, 34 percent of all jobless workers cannot collect benefits, because before losing their job they were part-time workers, self-employed, or working on commission, according to the Detroit Free Press.

Another huge group of the unemployed are not receiving benefits because they have exhausted their eligibility. This number will grow by the millions in the coming months. The federal stimulus package allocated $7 billion to the states to extend unemployment insurance from 26 to 59 weeks, and also allowed states to borrow interest-free from the federal government in order to meet payments.

The number of US workers receiving unemployment benefits has gone from 3 million to 9 million since only January 1. It is anticipated that the ranks of those receiving assistance will peak in the summer, and then begin to fall as hundreds of thousands of workers run past their benefits limit.

Unemployment is driving more and more US workers to state welfare. A recent survey by the National Conference of State Legislatures and the Wall Street Journal reveals that in 23 of the 30 most populous states—representing nearly 90 percent of the US population—welfare caseloads increased over the last year.

The biggest jump, 27 percent, occurred in Oregon, followed by South Carolina (23 percent), Florida (14 percent) and California (10 percent).

I bet these folks are really souped up in confidence. The real world is getting really ugly out there. Sooner or later this will catch up with the falsely inflated markets.

Jun 30 12:50 PM

[David Ristau:]

Well,

With consumer confidence dropping, it hit the entire market pretty hard and is moving the market down. This is showing that green shoots have to be basically some type of extraordinary fauna anymore to move this market. For the next couple of weeks, this will be the trend. If we have positive data we will rise 1-2%. If we have not so positive day drop 1-2%. Pretty much in two weeks we will be at these same prices going into the market moving earnings season. That will determine how this summer ends.

Not too worried about consumer confidence as for the market. If tomorrow we have good data, this will all be reversed.

David Ristau

President, The Oxen Group
theoxengroup.com

Jun 30 12:57 PM

[Ted Hurlbut:]

Let's look at this over a longer period than one month. One data point does not make a trend. Consumer confidence had been improving for the last few months prior to this report. It's going to take several more months before we can put this report in perspective.

Jul 01 01:29 PM