fundamental alert

Confidence Among US Consumers Rebounds From Record Low, Still Daunting

Tuesday, 25 November 2008 14:02:01 GMT  |  John Kicklighter, Currency Strategist

Any improvement in economic conditions is welcome when recession and financial crisis are primary concerns. However, there isn't much promise in consumer confidence when the pessimism in this sector is still driving the economy to potentially its worst recession in decades. According to the Conference Board's sentiment gauge, the dour outlook for the economy eased significantly; but not enough to suggest the light can be seen at the end of the tunnel. A reading of 44.9 from the gauge marked a 6.1 point improvement from the revised record low set during the peak of the financial crisis last month. So, where is this improved confidence coming from? The breakdown of the survey shows present conditions contracted to a new low, with destabilized credit conditions, rising unemployment and worsening business conditions all taken into account. However, expectations have marked a notable improvement. Expectations for business activity, employment and income have all marked upticks following the uncertainty surrounding the conclusion of the Presidential election and steep drop in gas prices. Will these expectations translate into spending to catalyze growth? Probably not. Financial conditions continue to worsen, unemployment continues to trend higher, lending is virtually frozen, prices have yet to significantly deflate and credit is vitually inaccessible. To derive a true sense of consumers' intentions, plans to purchase automobile, homes and major appliances over the next six months have all contracted significantly.

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