Tuesday, November 27, 2012

Confidence is up, but it's still very low

"Consumer confidence in U.S. reaches highest level in more than four years," reads the headline today. But as this chart shows, confidence is still very low; it's about as low as it was during the recessions of 1990-91 and 1980-82. But of course it's the change on the margin which is important, and that change is positive. Things are improving, even though the economy is still miserably weak.

Meanwhile, capital goods orders—a proxy for business investment—are down over 6% this year, although they have stabilized and even increased a bit in the past four months. This underscores the fact that the economy is weak, but it's not collapsing. A recession is not inevitable. Taken together, these charts also are consistent with the view that the strength in the equity market is not being driven by optimism, but rather by a gradual decline in pessimism.


Anonymous said...


The consumer is innumerate. That is why he is confident.

We're screwed.

Anonymous said...

The WSJ article may be misleading in that the $7 trillion in accrued SS & Medicare expense in 2011 may not be net of future projected tax revenue. The net accrual that would have to be booked if the Treasury used accrual accounting might be $4 trillion. Still it is a disaster. The benefits will not be paid out as promised.

Buddy R Pacifico said...

Scott, thanks for putting Consumer Confidence in the form of a long term chart. I did realise that it is still very low historically.

Benjamin Cole said...

Yeah, try finding a job.

When people think they can get a job, or make money in their very small businesses, we will see consumer confidence begin to rise.

We are watching the Japanification of the USA.

The Bank of Japan stayed with its zero inflation goal for 20 years despite every sign that such a goal, while correct by some currency-worship standards, actually suffocated the economy.

The Fed is suffocating the USA economy just a little less, with the 2 percent ceiling. The PCE deflator is running at 1.4 percent for last four years.

It doesn't help that federal outlays have swollen, especially for food stamps, the VA and all things related to Homeland Security and the military.

The Fed is coming around to Market Monetarism, but slowly.

Very slowly.

McKibbinUSA said...

The chart above reminds me that we all need to find new ways of making money in an environment where the American consumer is irrelevant -- some ideas I have is to conscript the US medical establishment and then export medical care to rich people overseas at premium rates -- another idea is to sell one or more of our states or territories (including inhabitants to other countries -- finally, the US could rent out its world-class military forces to wage wars under the flags of other nations -- well, I have a fourth idea, and that is that the US legalize gambling, prostitution, and narcotics in order to expand our tourist industry.

Folks, we need new ideas to save our economy -- the past provides no guidance -- hoping against hope for some miracle in the form of consumers who have nothing but debts to show for their lives is not a plan, but delusion.

Does anyone out there have any fresh ideas? Here's one that would definitely work (and I am serious when I suggest this) -- how about forgiving all debts in the US effective immediately -- the result would be a sharp rise in consumption -- the winners would be almost everyone in America -- note that forgiving all debts as a nation is a plan that would work, and would certainly be preferable to the other ideas outlined in the first paragraph.

Again, does anyone have a better idea?

Unknown said...

National sales tax,cut oil company subsidies and reduce military expenditures.