A quick post before hitting the street (and musuems and outlet shops and Best Buy and . . . )
Two inopposite data points came out this week that are interesting in what thye reveal about both Consumer and Business Confidence, and how each of these groups will be spending in the coming weeks and months.
With gasoline now considerably under $3, we have seen consumer confidence move back up off of very low levels. U Michigan Consumer-sentiment index snapped back smartly to 81.6, from an ugly low of 74.2 in October. Note that the index is still well below July readings of 96.5. Fuel prices will be the key to consumer confidence for the next quarter; If they stay low, consumer confidence will crawl back. High energy costs — and those December bills arriving after Jan 1 may ding confidence again.
But the present uptick provides signs that the Xmas shopping season will see net gains — although not as robust as last year, IMO. There’s a nice assortment of comments here: Retail Ball: How Analysts Predict Holiday Retail Sales, including yours truly.
At the same time, Business Hiring and Capex Spending remains full of trepidation. In Europe, the situation is described as "fragile."
"Corporate confidence faltered in key areas of Europe this month, underscoring the fragility of economic conditions across the region.
A drop in Germany’s bellwether index reflected a darkening view of current business conditions and the outlook for the coming year. On Thursday, the Ifo institute said its business-sentiment index for November fell to 97.8 from 98.8 in October. Last month, a dramatic improvement in the survey data had been hailed as a harbinger of better things in store for euro-zone companies.
In Belgium, the central bank reported a sudden downturn in business confidence to -4.3 in November, after a gradual improvement over the previous three months. The survey is another litmus test of business confidence across the 12-nation euro zone owing to Belgium’s heavy dependence on exports."
We have seen that Europe — and the UK in particular — are about 6 months to a year ahead of us in the Business Cycle.
In Europe, too, we see signs that Consumer are spending far more resiliantly than their Business counterparts: "the euro-zone picture isn’t uniformly bleak, and there are signs that morale is rising among some consumers . . . Italy’s shoppers are at the forefront of the new optimism, as consumer confidence leapt this week to 108.8, a three-year high, from 105.6 in October. Statisticians said the trigger was a newfound faith in the economy, which emerged after a midyear recession."
I am watching for two things: 1) Will the Business community pick up any optimism at all in temrs of spending and hiring? B) Will the improved sentiment and economy in Italy spill over to the rest of Europe and/or the United States?
Keep watching . . .
Falling Gas Prices Help Perk Up Consumers’ Mood
THE WALL STREET JOURNAL, November 25, 2005; Page A5
Business confidence softens
Weak consumer spending dents index in Germany; Belgian gauge also drops
DOW JONES NEWSWIRES, November 25, 2005; Page A9
Retail Ball: How Analysts Predict Holiday Retail Sales
November 25, 2005