Consumer Confidence and the Chicago PMI

Consumer Confidence was 6 points less than expected at 49.3 and down from 54.8 in May as both the Present Situation and Expectations components fell. The overall # is still about twice the lows of Feb but the improvement has been almost solely due to Expectations. This # has risen to 65.5 from 27.3 in Feb while the Present Situation (how people feel today as opposed to their optimism for the future) is at 24.8, up just 2.9 points from the low in March. Those that said jobs were Plentiful fell to 4.5 from 5.8, the lowest level since Feb ’92 and those that said jobs were Hard to Get rose about 1 pt but is 4 pts off its March high. Those that plan to buy a home within 6 months fell to 2.7 from 2.8 and those that plan to buy a car fell to 4.6 from 5.7. Those that think business conditions will get better 6 months hence fell a touch at 21.2 but are well above the low of 8.5 in Feb. Net-net, high debt levels and a tough labor market remain the overhang for the US consumer.

The June Chicago PMI was a touch better than expected at 39.9 and up from 34.9 in May and the 1980 low of 31.4 in March. New Orders rose 4.3 point to 41.6 and is the 2nd highest reading going back to Sept ’08 and backlogs rose more than 11 points to 37.6, the highest since Oct ’08 but both still remain firmly below. The Employment component rose 4 points to 28.9 but also remains well below 50. Prices paid rose almost 7 points, following the recent rise in commodity prices. Inventories rose for a 2nd month and it likely reflects the end of the massive destocking that occurred in Q4 and Q1 with the question of when restocking begins still unanswered. Bottom line, it’s clear that the economy is not getting any worse (for now) with the inventory response on the part of manufacturers holding the key for the timing and degree of any upturn, particularly in the auto sector. The ISM tomorrow will reconcile the regional surveys.

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