Today: confidence in confidence stuff?
Upbeat Consumer Optimism Is Bullish for Economy & Stocks
From Ed Yardeni:
Rising consumer confidence in the US is confirming my bullish outlook for the economy and stocks. Yesterday’s release of the August Consumer Confidence Index (CCI) was especially upbeat. It is based on a survey conducted monthly by the Conference Board. I think it is more sensitive to labor market conditions than the survey conducted by the University of Michigan to derive their Consumer Sentiment Index (CSI). Here are some of the key highlights that impressed me the most:
(1) The CCI jumped 2.1 points to 92.4 in August. That’s the highest reading since October 2007. The gain was led by the CCI’s present situation component. Also leading the way higher was the CCI for consumers who are 55 years old or older. They tend to have more income and wealth, and to spend more when they are optimistic.
(2) The Conference Board reported that the “jobs plentiful” response rate jumped from 15.6% during July to 18.2% during August, the highest since March 2008. The CCI is highly correlated with the quits rate. The latter rose in June to the highest reading since July 2008. August’s CCI suggests that it continued to rise during July and August. As Fed Chair Janet Yellen has noted, when workers perceive that jobs are plentiful, they are more likely to seek another job and quit their current one.
(3) I average the CCI and CSI to derive our Consumer Optimism Index (COI). It was little changed at 85.8 in August from July’s 86.1, which was the best level since October 2007. The present situation index jumped to 97.1, the highest since January 2008. The expectations component remains in its flattish and choppy range of the past couple of years.
Dr. Yardeni may be right as far as the economy goes (because of the better employment outlook) but I have yet to find a good correlation between consumer confidence and stock prices.
And now this from ChangeWave Research:
Continued Momentum for U.S. Consumer Spending – But Confidence Stumbles
The survey of 2,002 U.S. consumers – completed August 19 – shows spending is up for electronics and autos. Back to School shopping plans are positive as well, although the spending increase is a bit more modest than a year ago.
In another positive, consumer concerns over higher energy costs and inflation are easing. But in a note of caution, consumer expectations are down slightly and confidence has stumbled significantly this month. Nonetheless, the August survey contains the best overall spending scores in more than four years.
A total of 28% of respondents believe the overall direction of the U.S. economy will improve over the next 90 days – up 1-pt from July. But 23% now think it will worsen, which is 4-pts worse than previously.
A total of 45% now say they’re Less Confident in the U.S. stock market than they were 90 days ago – 11-pts worse than July. Only 12% say they’re More Confident – down 6-pts from previously to the lowest level of the past six months.
Consumers Have Confidence But Not Lots of Cash For consumers, good cheer hasn’t translated to stronger spending. As has been the case throughout most of this recovery, the spirit is willing but the wallet is weak.
The latest reading on consumer confidence, released Tuesday by the Conference Board, shows households are as upbeat about the economy as they were in 2007, as the last expansion was about to end. (…)
But for people with jobs, pay raises remain minimal and barely pacing inflation. Small wage gains have held back spending.
Worse still, the board survey shows households don’t expect much change in the situation. In August, 15.5% of households expected their earnings would rise in the next six months, down from 17.7% saying that in July and the lowest reading since March. (…) for most households, paychecks, not wealth or confidence, are the main driver for spending.
Speaking of cash, in reality, real disposable income is rising at a 2.5% Y/Y clip. Not great, but not so bad either. But note also that wages and salaries have been rising at a 7.4% annual rate in the last 6 months (+4.0% last 3 months).
Meanwhile,
Euro-Area Confidence Falls as Low Inflation Alarms ECB
German Unemployment Rises as Risks to Economy Build German unemployment unexpectedly rose in August as a stagnating euro-area recovery and tension with Russia darkened the outlook for Europe’s largest economy.
The number of people out of work climbed a seasonally adjusted 2,000 to 2.901 million in August, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 5,000, according to the median of 30 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent, the lowest level in more than two decades.
Spain Growth Picks Up as Consumer Prices Drop Most Since ’09 Domestic demand drove faster economic growth in Spain last quarter, while consumer prices extended a decline in August that has sparked a debate about another round of European Central Bank stimulus.
Gross domestic product rose 0.6 percent from the first quarter as household spending and investment advanced, the National Statistics Institute in Madrid said today, confirming its first estimate. Consumer prices fell 0.5 percent in August from a year ago, the sharpest decline since Oct. 2009, it said in a separate release.
Nonbank Mortgage Lenders Bounce Back In the first half of the year, lenders that aren’t banks made almost a quarter of all mortgage loans, the highest level since at least the financial crisis.
(…) Now the nonbank mortgage leaders say they are catering mainly to safe borrowers and they view the current pullback by big banks as an opportunity to boost market share. (…)
Kiev: Russian Forces Seize Coastal Town Kiev said that Russian forces have seized a key coastal town near the border with Russia, part of a wider assault that is raising fears Moscow is undertaking an outright invasion.
Russia accused of Ukraine incursion Rebel leader claims as many as 4,000 Russians fighting in neighbour’s east
- Proof grows of Moscow army hand in Ukraine
- U.S. Says Russia May Be Directing Ukraine Rebel Offensive
But don’t you worry (thanks Pat):
APPLE BUYERS FOUND!
Remember a while back when Zerohedge was wondering who might buy more Apple shares given that just about everybody owned the stock? Factset answers:
Apple showed 121 additional institutional shareholders in Q2, which amounted to an increase of 4.5% quarter-over-quarter. Apple already had a large institutional baseline, with approximately 2,700 institutional shareholders in Q1 (the most of any equity), but its percentage growth in this metric still surpassed those of the ten most widely held equities.
The two largest buyers of Apple in Q2 held much smaller positions in the prior quarter. Capstone Investment Advisors and Susquehanna Financial Group added nearly $3.5 billion in Apple, which amounted to fourteen- and five-fold increases in exposure, respectively. However, Susquehanna was previously a much larger shareholder, and owned 1.7% of Apple as recently as Q4 2012 (it now holds 0.4% of shares outstanding). Fidelity Management & Research Co., Apple’s fourth largest shareholder, was the third largest buyer of Apple stock over the quarter, while SSgA Funds Management and BlackRock Fund Advisors, the second and third largest shareholders, were among the biggest sellers.
