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Where Is The Confidence?

Written by admin | Aug, 1, 2013

consumer-confidence-062811There have been so many articles written by the mainstream media in regards to the economic recovery which have trumpeted everything from incremental increases in the job market, which has been more of a function of declining layoffs, to increases in auto production, which happens to still be near recessionary levels. The bottom line, however, remains that there has been little, if any, real recovery in the market without the support of massive amounts of federal aid.

This really shows up in the attached chart which shows the gap in consumer expectations versus consumer’s view of their present situation. With so much of the improvement in consumer confidence coming from hopeful expectations rather than feeling better about their current situation – this has led to a plunge in the confidence gap (present situation – expectations) to some of the lowest levels since early 80’s.

With consumer’s attitude about their current situation so low it is not surprising that we are seeing a weakening economic environment across the board especially where the consumer is primarily concerned. The impact on the consumer is not coming from just their perceived issues with the current political environment. In reality it comes from where the consumer is hit the hardest – their pocketbook. With food and energy eating up 22% of the wages and salaries, home delinquencies soaring and unemployment at very high levels; the level of stress on the average consumer is suffocating. The chart shows where the biggest concern lies…jobs! The gap between jobs being plentiful and hard to get has rarely been this wide and the inability to obtain work at a reasonable wage is weighing on the attitude of the consumer which ultimately translates into weaker economic growth.  As we have discussed in past missives and blogs – you cannot create “jobs, jobs, jobs” until you clear the environment where the consumer can start to spend again. Businesses will not ramp up production and employment without an incremental demand increase for their goods or services and no legislation, tax break or promise will change that. The virtuous economic cycle begins with consumers spending money and they can’t spend money they don’t have especially when they are trying to deleverage their balance sheet. Wake up Washington – you are trying to fix everything but the right thing.

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