Tradex Global Commentary: Consumer Confidence

TRADEX GLOBAL INTERNAL COMMENTARY

The consumer confidence figures were worse than expected, dropping to 62.0 from 64.4, which is a five-month low.  Consensus expectations for the Index was 63.5.  The “expectations” component dropped from 77.3 to 72.3, its lowest level since November 2011.  The view of the labor market has worsened and current payroll employment remains below the pre-recession peak levels for both the 2001 and 2007 recessions.  Confidence is key to small business owners taking a “leap of faith” and hiring new employees.  It is a good sign to see some further home price stabilization, but without confidence and hiring, the housing market will remain in limbo… Our hedges remain on, while the S&P grinds higher today.  – Richard Travia

EXTERNAL RESEARCH COMMENTARY

Confidence among U.S. consumers dropped in June for a fourth consecutive month as mounting concern over jobs and incomes dimmed the outlook for spending. The Conference Board’s sentiment index fell to 62, a five- month low, from a revised 64.4 in May, figures from the New York-based private research group showed today. Another report showed home prices were stabilizing. The slide in confidence raises the risk that the slowdown in hiring revealed by last month’s jobs report will cause households to retrench, restraining the spending that accounts for about 70 percent of the economy. The weak labor market is overshadowing the benefit of the lowest gasoline prices in five months, one reason why companies like Ford Motor Co. (F) are keeping an eye on attitudes. “The employment situation continues to weigh on consumer minds,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who correctly forecast the confidence index. “Usually consumers react to falling gasoline prices by increasing their spending, but this time around it looks like they’re a little bit cautious.” Stocks fluctuated between gains and losses, held back by concern over the drop in confidence and the European debt crisis. The Standard & Poor’s 500 Index rose 0.3 percent to 1,317.79 at 12:07 p.m. in New York. Elsewhere, Britain had a larger budget shortfall than economists forecast in May as the recession hit taxes and pushed up welfare spending. The median forecast of 69 economists surveyed by Bloomberg News projected the U.S. confidence index would fall to 63. Estimates ranged from 58 to 66.8. The measure averaged 53.7 during the 18-month recession that ended in June 2009.

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