Consumer Confidence Expectations Soar, Current Confidence in Gutter; Larry Summers Yaps about Second Stimulus
Courtesy of Mish
Although the consumer confidence current conditions index remains in the gutter, the expectations index shows increasing optimism. Please consider Consumers Gain Confidence as Employment Improves.
The Conference Board’s confidence index rose to 63.3, exceeding all estimates of economists surveyed by Bloomberg News and the highest level in two years, according to a report from the New York-based private research group. Other figures showed home prices rose less than projected in the year through March.
“I’m relatively optimistic that we’ll get through the European debt crisis without dire economic consequences, but the jury is still out on that one,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. Home prices “are going to drag along the bottom for a while until we get a better handle on the overhang” of inventories.
The Conference Board’s measure of present conditions increased to 30.2 this month, the highest level since December 2008. The gauge of expectations for the next six months surged to 85.3, the highest point since August 2007, four months before the recession began.
The percent of respondents expecting more jobs will become available increased to the highest point since December 2003.
Confidence, “although still weak by historical levels, appears to be gaining traction,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. Expectations have been “fueled primarily by growing optimism about business and labor market conditions,” she said.
Expectations Not the Same as Jobs
Present conditions are telling one story while expectations are another. However, expectations are not the same as jobs. People are starting to believe nonsense about the strengthening economy even as the treasury market and credit markets are singing a different tune.
I happen to believe the credit markets.
5-year treasury yields and rising junk bond yields paint a far different picture than consumer expectations. (Please see Corporate Bonds Smacked, Junk Yields Rise, Deals Pulled; Treasuries Rally; Yield Curve Flattens; Global Slowdown Coming for details).
No matter what one thinks of the US economy in isolation, it should be crystal clear that Europe is slowing and China is gasping for air with an export model not prepared for a slowdown anywhere, let alone a global slowdown.
Moreover, various stimulus packages in the US have run their course or are about to.
Larry Summers Wants Second Stimulus Package
Inquiring minds are reading Second Stimulus Plan on the Horizon?.
Larry Summers, the senior economic adviser to President Obama, reportedly asked Congress yesterday to begin drafting plans for a second stimulus package to prevent the economy from suffering a double dip recession. Summers suggested additional loans for small businesses, an extension of unemployment insurance, and financial aid to states to avoid further layoffs in the public education sector.
In recent months, Summers – who has a bit of a reputation for falling asleep at economic policy meetings – has made numerous public statements highlighting the strength of the economic recovery.
Accordingly, it comes as somewhat of a surprise that these measures would be needed if the recovery were in fact so strong.
Summers is likely talking up the economy in order to instill confidence in American consumers, while simultaneously proposing measures that keep the stimulus-driven recovery from faltering.
If the economy was recovering, the mortgage market would not be entirely government sponsored. Please see FHA Volume Sign of ‘Very Sick System’; Fannie, Freddie, FHA Account for 90% of Mortgage Market for details.
Finally, if this recovery was real, we would not hear Summers waking up from his economic naps, yapping about the need for another stimulus package.
