February 23, 2010

Dark Febrary Confidence

Is the U.S. economy teetering on the brink again?

We will learn in the coming months whether the U.S. and the world will escape this 2nd great depression, which has been only temporarily held off by massive worldwide stimulus and monetary easing.

At first, today's horrific reading of consumer confidence might seem to indicate the worst.
The Present Situation Index decreased to 19.4 from 25.2....
... "Consumer Confidence, which had been improving over the past few months, declined sharply in February. Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5). Consumers' short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."

After all, confidence, along with dollar-exchange-rate-influenced American exports, will decide our economic future.

Notice though that the other sharp historical low was also in a February (1983). Winter has blasted more than roads and faces this year.

I think this actually is an effect of the pronouned weather. If so, this particular dip (from weak to abysmal) will reverse in the sunshine of the spring.

We'll know more about the general state of confidence, and our economic future, once spring lifts spirits and we see the numbers in April and May.

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