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Timing Is Everything

07/30/2014

I cannot remember the last time that Consumer Confidence increased 4.5 points in one month, but it did this month.  That means more people are optimistic about their current financial position as well as their future financial position.  There is a close relationship between the labor market and consumer confidence.  As the labor market improves, consumer confidence increases, and both have.

Of course, the Confidence Survey was taken on July 17th, which was the day the Russian separatists shot down the Malaysian passenger jet, as well as the same day the Israelis invaded Gaza again.  Therefore, many analysts are suggesting a survey taken on July 18th would not be nearly so healthy.  I disagree and don’t think many Americans are losing any sleep over foreign tragedies so far away.

As consumer confidence increases, consumer spending increases.  Consumer spending is almost 70% of GDP, suggesting GDP growth will increase.  And, lo and behold . . .

I cannot remember the last time that GDP growth was a whopping 4% during the second quarter.  That may sound miserly compared to China’s 7.5%, but it is very strong for a mature economy like the U.S.  Of course, it was expected to rebound nicely after the winter-crushed first quarter GDP growth, which was a negative 2.9%.  But, it was not expected to grow at 4%.  Before we rejoice too much, let’s wait until we see next month’s revised estimate.

Nonetheless, economic data continues to look strong.  Most analysts believe the stock market is 6-12 month leading indicator of the economy, and that certainly seems to be the case again.

Party on, Garth . . . 

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