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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

Consumer Confidence Charts a Course Lower

On March 23, 2011, in Economy, by Tim

Not that it necessarily matters all that much, since the engine of  economic growth as we’ve come to know it in the U.S. – consumer spending – often goes in the opposite direction of the trend in consumer confidence, but Gallup reports that the mood of the public has now reached its lowest level of the year as indicated below. Interestingly, the “expectations” index is worse than last year at this time while the “current conditions” index is better.

As noted here earlier in the month, the Reuters/University of Michigan consumer sentiment index registered its sharpest decline since the financial crisis began in late-2008, so, high gas prices and other factors are clearly taking a toll. The final reading on consumer sentiment will be reported this Friday and, next week, the Conference Board’s consumer confidence index will likely see a similar plunge from a month ago.

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Consumer Sentiment Plunges

On March 11, 2011, in Economy, by Tim

The Reuters/University of Michigan consumer sentiment index registered its biggest decline since the financial crisis began in late-2008, tumbling from a post-recession high of 77.5 in February to 68.2 in the first of two readings for March.

Sharply higher gasoline prices are no doubt weighing on Americans as the price at the pump has risen almost 50 cents per gallon in recent months and more calls of another “oil shock” are heard, the probability of renewed economic weakness steadily increasing.

The expectations index plunged more than 13 points, from 71.6 to just 58.3, while the current conditions index fell from 86.9 to 83.6. Recall that readings much closer to 100 are typical and periods of recession usually see sentiment readings in the 70 range or lower, so, it would appear that many Americans now think that the U.S. economy has taken a dramatic turn for the worse.

Part of that thinking is surely being driven by the expectation of rising consumer prices, the one-year inflation outlook up sharply from 3.4 percent to 4.6 percent. Five-year inflation expectations also rose, up from 2.9 percent to 3.2 percent, all of which will give the Federal Open Market Committee more to talk about when they gather next week since consumer inflation expectations play an important role in their formulation of monetary policy.

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Retail Sales Surge on Autos, Gasoline

On March 11, 2011, in Economy, by Tim

The Commerce Department reported(.pdf) that retail sales rose 1.0 percent in February following an upwardly revised gain of 0.7 percent in January, recent increases driven by surging automobile sales and sharply higher gasoline prices. On a year-over-year basis, overall retails sales (including seasonal adjustments but not factoring in price increases) are now 8.9 percent higher.

Excluding autos, sales rose 0.7 percent after a gain of 0.6 percent in January and, when both autos and gasoline are excluded from the total, sales were 0.6 percent higher in February following an increase of 0.5 percent the month prior.

Motor vehicles and parts sales surged 2.3 percent (no doubt aided by the recent easing in credit markets for auto loans) and gasoline stations sales rose 1.4 percent, but, there was also strength elsewhere. Miscellaneous store retailers recorded a 2.0 percent sales gain while sporting goods, hobby, book & music stores saw an increase of 1.3 percent and sales at food service & drinking places rose 1.2 percent.

While this data is subject to revision and may be negatively impacted by surging gasoline prices – also this morning, the Reuters/University of Michigan consumer sentiment index saw its sharpest decline since the 2008 financial crisis – it would appear that American shoppers were still on a spending spree in February.

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Gas Prices Rise, Consumer Confidence Falls

On March 9, 2011, in Economy, Our Culture, by Tim

In the latest data from both the Conference Board’s consumer confidence survey and the Reuters/University of Michigan consumer sentiment index, the mood of the typical American was seen reaching a multi-year high last month, however, that was before gasoline prices began hitting $4 a gallon in parts of the country.

According to the latest data from the folks at Gallup, the outlook of consumers is now changing rapidly, the February decline shown below understating the drop in confidence according to this report.

It seems that weekly surveys in late-February plunged as gasoline prices rose, the latest reading on the index above coming in at -30 as noted here,  following readings of -20, -18, and -26 earlier in the month that produced the -24 figure shown above.

The bi-monthly Reuters/University of Michigan consumer sentiment index will be reported this Friday and will probably also show a souring mood – high and still rising gasoline prices seem to have that effect.

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Now, Boxed Wine Instead of $60 Bottles

On February 19, 2011, in Housing, Our Culture, Stocks, by Tim

More stunning data and anecdotal accounts of the miserable retirement prospects for baby boomers can be found in this WSJ story by E.S. Browning in which a 71-year old former AOL executive assistant now has to drink boxed wine instead of  $60 bottles.

Retiring Boomers Find 401(k) Plans Fall Short

The 401(k) generation is beginning to retire, and it isn’t a pretty sight.

The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.

The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.

This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick.

Facing shortfalls, many people are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined.

This is well worth reading in its entirety and, if you’re like me, you won’t know whether to laugh or cry, especially the part where 401k plans are characterized as a “gold mine for money-management firms”. It’s still unbelievable how, just a few years ago, people actually thought they didn’t have to save for retirement because their house was doing it for them. Oh yeah, and then the stock market crashed and many aspiring retirees sold all their stocks.

The idea that you can save five or ten percent of your income while working, using the rest to ratchet up your standard of living, and then maintain that standard of living in retirement just might be another good example of how conventional wisdom is oftentimes wrong.

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Retail Sales Slow, Import/Export Prices Surge

On February 15, 2011, in Economy, by Tim

The Commerce Department reported(.pdf) that retail sales rose less than expected in January, up 0.3 percent after average gains of 0.9 percent during the prior six months, far below analysts’ expectations for gains of between 0.5 and 0.7 percent.

Big sales gains at gasoline stations and grocery stores, both up 1.4 percent last month, offset declines at housing related retailers, the recently resurgent building materials category reversing course as sales dropped 2.9 percent while furniture store sales fell 0.3 percent. On a year-over-year basis, retail sales still sport impressive gains, up 7.8 percent.

In other news, the Labor Department reported more sharp increases in import/export prices that rose 1.5 percent and 1.2 percent, respectively, in January. This is the first of the price reports for the week, to be followed by producer prices tomorrow and the latest consumer price data on Thursday. Higher inflation appears to be occurring everywhere but in the U.S. Consumer Price Index – we’ll see if that changes this week.

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