On Consumer Confidence

Written by Research | 01 July 2009

Consumer confidence has posted a surprisingly drop to 49.3 in June from 54.9 in May, a data below of 55.1 pts expected by market. Chicago's PMI is continuing in the negative field with a reading of 39.9 in April, despite an improvement from 34.9 posted in March.

The widely expected drop on the consumer confidence which fell below a 55.1 level; indicated that not a lot of people are well convinced of the recovery being made on the US economy. As most US stocks drop after the news release came out. Although, it should have had a more negative effect on the US Dollar, it gave most investors a reason to buy US Dollars as a safe haven compared to stock vlaue.

Compared from previous readings in May CCI

At the same token, the weakness on oil and gold prices have continued to support the underlying currency contrary to the earlier movement of the British Pound and the Euro during the earlier Asian Sessions which prompted the Pound to establish a new high of 1.6742 after which retreated back to the 1.6500 GBP / USD lower price levels. Expect some wider trading range for these majors as it continues to be on the defensive with much of the bias sentiments still favoring a strength of the Pound. Eventually, it will somehow loose steam on each attempt to make new highs for the pound and the Euro.

Although, some analyst looks at it at the opposite side of the trend and sees that the Euro will eventually fall at the price levels of 1.3880 support before it goes higher. they anticipate that this 3rd quarter of the year may see some negative pressures against the European currencies as it tries to sustain its upward trend.

Source: BHF- Bank Economics / Research Department

June 30,2009

Despite rapidly rising unemployment, the Conference Board’s consumer confidence rebounded in April and May, particularly due to expectations. However, confidence could have fallen in June: the June survey of the University of Michigan showed a slight deterioration in expectations, and the weekly ABC consumer comfort poll has declined by six points in the last two weeks. Although the pace of job cuts has slowed somewhat, it has remained historically high, and the unemployment rate rose to 9.4% in May. Thus the assessment of how hard it is to get a new job could have corrected downwards after two consecutive improvements. However, the additional government benefits connected with the “American Recovery and Reinvestment Act” could have lifted consumer sentiment somewhat. But all in all, we expect the Conference Board’s consumer confidence to have declined slightly to 54.5 in June.

Contrary to other regional PMIs and the national ISM manufacturing indices, the Chicago purchasing manager index declined in May, from 40.1 to 34.9. Automobile plant shutdowns could have been mainly responsible for that. The Beige Book indicated that overall activity weakened further in Chicago, and our forecast of 38.0 suggests that the pace of deterioration has only slowed modestly in June.

The results of the regional manufacturing surveys so far were mixed: the New York Empire fell back after two significant improvements, but the Philadelphia Fed index increased markedly, and the Richmond Fed index was in positive territory for the second consecutive month. Therefore we expect the ISM manufacturing index to have gone up again from 42.8 to 44.5 in June. One should bear in mind, however, that this does not indicate an increase in activity, but merely a decrease in the pace of deterioration – partly due to substantial inventory adjustments.

Factory orders could have increased by 1.4% mom in May, twice the April rate. We already know that durable goods orders went up by 1.8% mom again, and non-durable goods orders are likely to have risen too: firstly, gasoline prices were much higher, and secondly, the ISM orders component exceeded the expansion threshold for the first time since November 2007