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September Consumer Confidence at Recessionary Levels

Grim confidence report hits stocks sharply


September consumer confidence dropped to 48.5 from a lower revised 53.2 in August. The number was below analyst expectations. Stocks dipped sharply on the news. 

The latest confidence numbers from the Conference Board show the widening disconnect between consumer perception of the U.S. economy and the spin being presented by officialdom. A confidence number of 90 or above indicates a positive view on the economy. The current number is lower than the lowest number from the 2001 recession. It is, in fact, barely above the lowest number recorded during any recessionary period since 1980, except for the recent Great Recession. Yet, government officials and the mainstream media keep telling us that the U.S. economy is in recovery. Based on their own experiences, American consumers aren’t buying it.
The current conditions number for September came in at close to a rock bottom 23.1. This view on the current state of the economy has yet to make any significant move up since the credit crisis in 2008. What caused the overall consumer confidence numbers to rise in the last year was the expectations component, which represents consumers’ view of what the U.S. economy will be like in the future. After an onslaught of  “the economy is on the road to recovery” propaganda emanating from Washington, D.C., and dutifully repeated by the mainstream media, American consumers in 2009 started becoming increasingly confident that a better economy was waiting for them down the road. After not seeing this happen month after month after month after month after month after month, consumers are starting to have their doubts. The expectations number fell from 72.0 in August to 65.4 in September. If it remains on its current trajectory, the overall confidence number will get back to where it was during the credit crisis.
Consumer spending accounts for 72% of GDP. Consumers without confidence don’t spend. Consumers without jobs and credit don’t spend either. Nevertheless, the government has consistently reported an increase in consumer spending taking place while total wages and salaries have fallen and available consumer credit has been reduced. The savings rate is higher than it used to be as well, which should lower consumer spending even more. But the rules of arithmetic and economics are different in Washington, D.C. than they are in the rest of the universe (the only other known exceptions are in government statistical offices in other world capitals). For some reason American consumers are choosing to view the world as they see it instead of accepting the fanciful claims from the Washington con machine. If this continues, even stock traders might eventually catch on.

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