Friday, June 11, 2010

Our thoughts on some of today's economic indicators

It appears that consumers were not consuming as much as the government and/or economists had expected. The May retail sales monthly decline of 1.2% was below the consensus of a 0.2% monthly gain. This was a bit surprising as we thought consumers may still have some of their tax refunds to spend in May. This is the largest monthly decline in eight months.

Consumer confidence, on the other hand, is increasing as indicated by today's Reuters/University of Michigan Consumer Sentiment Index. It came in at 75.5, higher than the 74.5 consensus, and 1.9 points higher than the previous month. Then again, this index had also increased by 1.4 points in May, a month in which retail sales actually declined big. So, we'll see if consumers will actually put their money where their mouths are.

Both the index of expectations and of current conditions rose. According to the report, there is less fear regarding unemployment. We must note that although there has been some improvement in the employment picture, its mostly from the Census temp jobs. Let's hope that all of those Census workers will be able to find a FT job after the government is done with them.

Let's combine the smiling consumer sentiment data with the not so happy ECRI's Weekly Leading Index (WLI). The latest figure of 123.2 was lower than last week's 124.0, making this the fifth straight weekly decline. Its also the lowest level since the last week of July '09. We're not saying that this indicates the end of the world, but it does say that this economy is still not in good shape and that things are not improving as well or as quickly as many think. All of this may say that the market at these levels just may be expecting too much.

We still believe this recovery is losing steam. We wonder just how much more money the government can throw at this. With Bernanke in charge and his 'mothership' (this is what Dan Patrick calls his ex-employer, ESPN), Goldman Sachs, facing what at least on the surface appear to be some serious charges, we think everything will be thrown at this economy, even the Fed's kitchen sink, to at least make it look like its recovering and to keep that consumer confidence rising. Hopefully then consumption will get going, people will start working, government will begin generating huge tax revenues and will start paying off its debt. Be positive, think positively, have high hopes and good things will happen.

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