Consumer (Un)Confidence
Stocks moved absolutely sideways today, as well as the entire week.
10 Year Treasury Bonds gained a small amount of interest rate back, ending still over 4% at 4.05%. However, this week showed that 4% 10 year bonds are here now – so get used to it. Mortgage rates have already started their inevitable upward trend.
The dollar held onto its gains of this week, giving back a small amount today.
Gold gained $10 after the strong drop yesterday, providing a great buying opportunity then.
Oil and gasoline moved up slightly today, and are still struggling – trying to figure out whether or not the speculatively driven price is too high, and must come down, or not.
In the news today….
Consumer Spending was up 0.2% in April. Consumer Spending was flat (zero increase) when adjusted for inflation.
Consumer Income was up 0.2% in April, a fairly anemic number, especially considering that the tax rebates started coming out in April. This was much weaken than anticipated by the “experts.”
Consumer Confidence came in at a 28 year low (see chart below – “UofM Final”). This is driven by the already known fact that gasoline hikes are “in your face” and food price hikes are there every time you walk down the grocery aisle. One year inflation is currently projected to be 5.2% over the next year, and this is the highest level in over 5 years. While the measure of Consumer Confidence is highly subjective (like people taking a survey), the historic measure does correlate well with Consumer Economic Activity, and Consumer Economic Activity is 2/3’s of the US GDP measure – the biggest component.
Consumer Confidence is indicating that Consumers will be spending less in the future.
Dinner Conversation Tonight
A recent survey on how people are actually spending their tax rebates has found that the money is mostly being spent on “increased cost of living” – like gasoline and food.
How well will the rebate plan hatched by Congress, the President, Bernanke and Paulson work on stimulating the US economy if this holds true?
Here are today’s numbers:
Dow Jones 30 Industrial – 12,638 (down 8 points)
10 Year Treasury Bond – 4.05% (down 0.03%)
Euro – 1.5554
Gold – $892 (up $10)
Oil – $127.35 (up $0.73)
Gasoline – $3.35 (up $0.02)
