Faith in Recovery "Failing" as Consumer Confidence Hits Five-Month Low

The Conference Board’s measure of consumer confidence has tanked again — this time sinking to a five-month low — and one Philadelphia-based fixed-income strategist thinks it will take until at least 2013 before we see the kind of labor market recovery that will help to once again boost confidence and spending.

From Bloomberg:

“The Conference Board’s sentiment index fell to 50.4, below the median forecast of economists surveyed by Bloomberg News and the lowest level in five months, figures from the New York-based private research group showed today. Another report showed home prices rose more than forecast in May as a government tax credit temporarily underpinned sales.

“A jobless rate that is projected to hover near 10 percent for the rest of the year means household spending, which accounts for 70 percent of the economy, will take time to recover. Ford Motor Co. is among companies lowering industry sales forecast for the year as concerned consumers focus on saving more and paying down debt.

“’Faith in the economic recovery is failing,’ said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who had forecast the confidence index would drop to 50.3. ‘It’ll be 2013 before we see any semblance of normality in the labor market. It means weaker purchases.’”

The consumer confidence reading averaged about 98 during the period of growth leading up through 2007, versus about half that now. And, according to the same study, only about 10 percent of Americans expect their income to increase anytime within the coming six months. On the flip side, at least the same pessimism is spurring Americans to reduce debt. Consumer credit has taken a record dip of late, falling in 18 out of 20 consecutive months.

You can read more details in Bloomberg coverage of how July’s consumer confidence reading fell to a five-month low.


Rocky Vega,
The Daily Reckoning