Consumer Confidence Dips Due to Jobs - And the Price of Oil?

U.S. consumers turned decidedly more pessimistic in October, according to a report released Tuesday, with households increasingly worried about job prospects.

The Conference Board, a private research group, said its monthly Consumer Confidence Index fell to 47.7 this month, from a revised 53.4 in September, which was originally reported as 53.1. The current month's reading was well below economists' projections of 53.2, according to a survey conducted by Dow Jones Newswires.

The downturn in consumer confidence at this stage of the recovery is to be expected, as it has occurred in previous recoveries (please see chart below), and does not negate the buy signal on the economy given during the summer.

Source: Ned Davis Research

Although concern over jobs is the primary factor behind the decline, the rise in U.S. retail gasoline prices since the beginning of the year is also a likely, though recently unspoken, factor. This price rise is about $1.10, or 69 percent (see chart below).

A sustained move above $3.00, or an oil price of above $85, would in our minds put a brake on the economic recovery and bring another outcry over commodity speculation by hedge funds.


Disclosure: No positions.

Comments

[john s. gordon:]

'price of oil' on the speculative market is disconnected from economic reality - as usual.
> jack

Oct 28 08:23 AM

[Ferdinand E...:]

"Commodity speculation by hedge funds". What you should say is oil producers are not going to increase their supply, and as a result anybody who prefers more money to less money should start thinking about going long in oil. AND JACK, IT IS THE BEHAVIOR OF THE OIL PRODUCERS THAT IS THE BASIC REALITY IN THE OIL MARKET - especially the OPEC producers. Our good friend Monsieur de Margerie of Total made that point this week.

And yes, an oil price above $85/b is not just bad news, but VERY bad news. The present oil price is bad news.

Oct 28 09:01 AM

[John Mylant:]

"A sustained move above $3.00, or an oil price of above $85, would in our minds put a brake on the economic recovery and bring another outcry over commodity speculation by hedge funds."

I couldn't agree more with this statement. Consumer confidence will not last long even though in the short term it may recover. We are still on an upward trend & not finished yet. But we will see how influential oil will be in the quarter to come.

John Mylant
mylantsmoneyblog.typep.../

Oct 28 11:08 AM

[Options Tra...:]

high oil prices certainly isn't conducive to a recovering world economy. if the oil bubble grows before the economy has found a strong foothold, the world could get into a lot of trouble... soon.

Oct 28 11:22 AM

[PJS:]

"And yes, an oil price above $85/b is not just bad news, but VERY bad news. The present oil price is bad news."

More likely, interest rates will stay low a while longer supporting bond markets. Meanwhile, world oil producers will go scared and oversupply a chronically weak global economy.

Oct 28 11:22 AM

[jerrydd:]

The price of oil will go up until it produces another recession. While it certainly isn't supported by short term demand, anyone who looks at the facts knows oil producers can't produce enough once the economy recovers next yr.

We hit peak oil in spring, 08, deal with it as you have no choice.

Oct 28 12:06 PM

[Xtran:]

Hard to know where to start or end on oil prices and the economy - but we could start saying that TARP & Co loans, borrowing and Keynesian largesse to the bank, insurance and finance sector, only in the US has swallowed about $ 3.75 trillion since late 2008.

The ultimate peak year so far for US oil import costs was 2007 at about $ 370 billion.

Thats 10 years comfort for US oil imports, if printing money was the way to "solve" high oil import costs and there was no movement on cutting oil demand - but in fact it is falling. For both good and bad reasons, to be sure.

Bernanke already set out, August 21, what he wants oil prices to be, but this is the same person who signed the checks for Keynesian largesse ! Maybe oil prices up to about $ 125 a barrel can be tolerated by the economy, maybe not. Tune in later

Andrew McKillop

Oct 28 02:41 PM

[G. L. Turner:]

Ferndinand, to claim to be such an expert, you constantly show your bias and ignorance, Just read the article in SA yesterday (or the day before) about the amount of hedge fund/GS/MS/JPM money ("managed money") that had poured into long positions in just the last 3 weeks.

You have got to be a shill for one or several of these WS pariah!

Please get your facts straight instead of trying to lead us down some 'intended' path of maya.

Oct 29 02:47 AM