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Tuesday, December 28, 2010

Perception V. Reality- Consumer Confidence


Ever see reviews of a movie coming out that is simply glowing-- '5 stars'.. Thumbs Up... Must See!... and while you normally wouldn't see the film, the reviews convince you to go, then when you actually see the film, you find it to be a piece of crap and you walk out before its through?  Its because you end up accepting a mob mentality that if A, B & C loved the film, you must go see it and undeniably will love it yourself.

This same mindset works with the news, espec. where economy is concerned.

Perception:

Here are some headlines from yesterday, 12/27/10 --

Retailers Enjoy Biggest Shopping Boom since 2005 -- Yahoo News

Holiday Shopping Season was a Blessing for Retailers- Pioneer Press

Holiday Shopping Marathon Continues-- Santa Rosa Press Democrat

2010 Holiday Shopping May be Strongest Ever- WRIC Ch. 8 Richmond

Reality:

Consumer Confidence Shows Surprise Drop in December (CNBC) -- "U.S. consumer confidence unexpectedly deteriorated in December, hurt by increasing worries about the jobs market, according to a private report released on Tuesday.  The Conference Board, an industry group, said its index of consumer attitudes slipped to 52.5 in December from an upwardly revised 54.3 in November. The median of forecasts from analysts polled by Reuters was for a reading of 56.0. The expectations index declined to 71.9 in December from 73.6 in November.  The present situation index fell to 23.5 from 25.4. Consumers' labor market assessment worsened. The "jobs hard to get" index rose to 46.8% in December from 46.3% last month, while the "jobs plentiful" index dropped to 3.9 percent from 4.3 percent."

Consumer confidence is an economic indicator which measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. How confident people feel about stability of their incomes determines their spending activity and therefore serves as one of the key indicators for the overall shape of the economy. In essence, if the economy expands causing consumer confidence to be higher, consumers will be making more purchases.

When the economy is good, the Index will be between 100-110

Analysts were predicting the consumer confidence index to be 56.0, which would be a rise from November's numbers.  They were Wrong.   These are professionals who do this for a living and they were Wrong in their computations.  It means all those economists that were trumpeted in the mainstream news lately for touting a robust 2011-- they will be Wrong too.

It also confirms A&G's previous posting "The economic Christmas Bucket List"-  people did shop in droves this Christmas but it wasn't because they felt confident, optimistic or hopeful about the future.  Many people were just worn out from three years of economic misery and determined to have the best damned Christmas possible as if it would be their last.

Every positive indicator of the consumer confidence index fell ... every negative indicator rose.  

Here's the part of the Consumer Confidence survey which the media ignored (taken from The Conference Board's website) --  "Consumers' appraisal of present-day conditions was slightly more pessimistic than in November... those claiming business conditions are "good" declined to 7.5 percent from 8.5 percent. Consumers’ assessment of the labor market was less favorable than last month... Those anticipating fewer jobs in the months ahead increased to 19.5 percent from 19.1 percent, while those expecting more jobs declined to 14.3 percent from 15.1 percent. The proportion of consumers expecting an increase in their incomes decreased to 9.9 percent from 11.1 percent."

In summary, the media spent 5-6 weeks conveying "Recovery" and other "happy" nonsense, and wanted you to believe this by a constant drumbeating of that message into your subconscious.  The reality is people are nervous and fearful about their future and the direction the nation & global economy is headed.. and rightfully so.

Lastly, if you're curious... The stock market acknowledged those consumer confidence figures and the broader sense of gloom people are feeling, by going Up 35pts as of 3:40p today

Perception  --   Reality

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