Gallup Reports Lowest Consumer Confidence Since December
Down 9% Since DecemberNearly 1 in 10 Americans feels less optimistic about the economy than they did at Christmas. The report measured aggregate data, then assigned a confidence score of 95, well below the record highs of over 140 set in the late-90's.
Low Spending is Holding Back the EconomyIn general, our economy thrives on domestic spending. Consumers with low confidence don't impact the economy as much as high-confidence buyers do. In a recovery that's already noted for higher-than-usual consumer savings, this extra incentive to stay home instead of buy a new television could be hurting the market.
Of course, with record low wages and still-iffy unemployment, it's hard to blame the consumer for being picky.
Raise Wages, Raise ConfidenceOne of the fastest and easiest ways to raise confidence in the economy is to pay workers more. Not only does that make them optimistic about the future, it gives them ongoing revenue to contribute to the marketplace. A well-paid consumer is more likely to spend, and our economy is suffering from lowered consumer spending.
Near-Term ImplicationsJust this closing quarter, businesses like Apple (AAPL), Microsoft (MSFT), and Mattel (MAT) all missed on earnings because of lowered sales. That's had a real impact on the stock market, which should be easily above 18,000 going into the summer. Instead it's been stuck in the doldrums, down 100 to 200 points from its potential.
Stagnation In The Markets This SummerSince nobody is clamouring for a rise in middle-class wages, and a raise in the minimum wage by the summer is unlikely, markets will probably stagnate a bit over the summer. There could be a surprise unemployment report that shakes things up, but even after the next round of earnings reports the market will likely remain sluggish. The coming Fed rate hike might also shake up the market this summer, but things like low consumer confidence make it more likely that they'll hold off on raising the prime until September.
Go Out and SpendIn the near term, if you want to fight trends like this it takes spending and credit. As soon as consumers are ready to go out and spend, confidence will begin to spread and rise. Unfortunately, this latest report from Gallup seems to show that we're just not ready to get out our credit cards until things get a little bit better.
Published on May 7, 2015By Aaron Phillips
Posted in ...Market Commentary