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Consumer Confidence Index tanks


consumer confidence
Consumer Confidence Index dropped 9.8 points to 52.9 from 62.7. Consumer Confidence would be perfect at 100. The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board.

What is a small business to do in a recovery that appears to be stalling?

There are a few key indicators to examine when trying to spot a macro-economic trend for this recovery. First lets take a look at the unemployment and Jobless claims.

unemployment 2010
Source: US Dept. of Labor

Although, we’re off the recession high for unemployment…it’s a slow crawl down to the 4 -5% unemployment 2005 and 2006 numbers. At the current pace it could take up to five years to get to the previous levels.

Source: US Dept of Labor

The jobless claims looks favorable as the employment graph has clearly trended higher. However, 413,000 census workers recently hired temporarily inflated the employment graph. Similar to the tax credit for new home purchases, we will not know a true baseline until the temporary census employment stimulus retreats. According to National Association of Realtors (NAR) the pending home index, dropped 30% to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9% below May 2009. Buyers rush to take advantage of the tax credit.

Realizing the consumer confidence is directly tied to employment and how much “cash” is in any one persons pocket, we need to examine equity and net worth.

This is actually a ray of sunshine because as the graph indicates, we’re off our 2007 lows. According to NAR’sDanielle Hale, Research Economist, we actually gained back $6 trillion of the $16 trillion decline, which is a good beginning.

The last indicator that relates to consumer confidence is retail sales and although we are up 16% from the bottom of 2009, we’ve recently had a month over month dip from May 2009 to May 2010. This will continue to mirror the consumer confidence index as an indicator of where consumers feel the economy is going. Hopefully we provided a few key indicators of how to analyze and trend the macro economy in the United States…let’s recap briefly:

Consumer confidence index
Jobless claims and unemployment data
Existing and pending home sales
Retail Sales

You also can dive into:
Durable goods and interest rate spreads, but we will save these indicators for another time.

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