The consumer confidence number came out this morning showing a huge increase. Just two months ago, the number was falling faster than Jay Leno’s tenure on the Tonight Show. It is now at the highest levels in 8 months and according to the consumer confidence board, the public believes that the worst is behind us.
The significance comes from the fact that two thirds of the nation’s growth rate is made up of consumer spending. Therefore, if the numbers hold, the second quarter GDP rate, while still negative, will be less negative than the 1st quarter, and it becomes possible for the recession to officially end by the end of the year.
Clearly, this is significant. Now, what I can’t wait for are the gnashing of teeth bound to come from the “yeah, but” crowd in the financial media. Those are the guys that have to report the good news but then fall all over themselves telling you why the good news is really bad news. In this instance my guess is that it will sound something like this:
“Consumer confidence came out higher than expected (yeah). However (but), the rate is still at the lowest levels not seen since 1994. It will sound something like that so that all the doom and gloomers can continue to scare your skivvies off of you and you will continue to watch their inane antics (can you say Jim Cramer? I knew that you could).
This is good news. For all of us who have been pointing out since January that things were starting to turn around, it does represent a little vindication, but we cannot claim any credit. The business cycle gets the credit and it should. The consumer feels better cause they kept their jobs, their house, and gas got cheaper, and housing prices are starting to become affordable, and perhaps their bank is actually talking to them about their individual situations.
Through it all, those of us who told you to invest when nobody wanted to because that is when the prices are the cheapest (30 percent ago), feel a little bit better and that has translated through to all of you.
Will it sustain? That is the big question. Has there been enough momentum built up in order to keep you all feeling good about yourselves are will your next 401k statement send you over the edge? Well, my guess is that it will be sustained but you are going to be tested once more. The problem for me is that I think the recovery may be short lived given the fact that the piper has to be paid for the trillions of dollars we have thrown at the problem. So, stay limber. When you are given the chance to react, you are going to have to pull the trigger to stay on top of things. So, it is not enough to do the work. You have to react to what you find out.
Blessings to all as you go through the process.
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