Confident Consumers Do Not Always Spend More

Confident Consumers Do Not Always Spend More

Confident Consumers Do Not Always Spend More

$DIA, $SPY, $QQQ, $VXX

US Consumer confidence is on the rise, Friday the University of Michigan Indicator (MSI) marked a 12 year high.

But, that does not mean that retailers should expect an overly merry holiday season, as far as actual retail sales and consumer-spending numbers are concerned.

Thursday, the US government released November consumer-spending figures, including Black Friday shopping numbers, that showed spending decelerated for the 2nd month running.

Worse, personal income, after taxes and adjusted for inflation, declined for the 1st month since October 2013.

Retail stocks suffered their worst day since June, with retailers making up 8 out of Thursday’s 10 worst-performing stocks in the S&P 500.

There is a clear bifurcation between measures of sentiment, and hard measures of economic activity, meaning what is actually happening.

Not only is the dissonance showing up in consumer confidence, but the same trend can be seen in other indicators tracked by government officials, economists and investors to gauge the health of the US economy.

For example, home builders’ confidence rose in December to the highest mark since July 2005, right before the peak of the last decade’s housing bubble, according to the National Association of Home Builders’ sentiment measure.

Yet, despite these good feelings, groundbreaking on new housing units plunged in November, the US Commerce Department reported last week, and have been mostly flat for more than a year.

Likewise, the closely watched Institute for Supply Management’s manufacturing index (ISM), which gauges US factory sentiment, has risen for the past 3 months.

But the Fed’s measure of industrial production, which gauges the actual output of factories, mines, utilities and more, in November posted its biggest decline since March.

So, as for the consumer data, the correlation between confidence and actual spending has historically been positive, but not all that strong.

Changes in consumer confidence have accounted for only about 33% of the changes in spending over the past 15 years, according to the data.

People may feel more optimistic about the future, but that does not mean they’re going to disgorge their savings on holiday gifts.

Friday, the US major stock market indexes finished at: DJIA +15.06 at 19933.94, NAS Comp +15.27 at 5462.69, S&P 500 +2.83 at 2263.79

Volume: Trade was pre-Holiday thin with just 616.7-M/shares exchanged on the NYSE

  • Russell 2000 +20.6% YTD
  • DJIA +14.4% YTD
  • S&P 500 +10.8% YTD
  • NAS Comp +9.1% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.32) Neutral (0.17) Bullish (0.44) Bullish (0.35)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.40) Bullish (0.40) Bullish (0.25) Very Bullish (0.56)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.36) Bullish (0.47) Bullish (0.25) Bullish (0.36)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Very Bearish (-0.65) Very Bearish (-0.60) Very Bearish (-0.67) Very Bearish (-0.67)

Merry Christmas, Happy Hanukkah and Good Wished for Success in Y 2017

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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