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Tomorrow’s Conference board reading might not live up to expectations.

In August, the Conference Board's consumer confidence index was significantly above the consensus forecast of 47.9, coming in at 54.1, up from 47.4 in July. This August improvement followed two consecutive months of disappointment, and was due to the Expectation sub-index increasing from 63.4 in July to 73.5 for the month.

As it stands right now, economist expectations are for more good news for September,  with a consensus forecast reading of 57, which implies another significant sequential improvement.

I just don’t think we can straight line a consumer recovery, and I have four primary factors that lead me to this conclusion:

First, most consumer companies that have spoken publicly on the topic have stated that they do not believe that consumers are ready to buy into the economic recovery narrative prophesied by the “experts” who are taking their clues from the strong equity market.  Second, most consumers think healthcare reform is bad news; President Obama’s full force effort to push healthcare reform over the past month should have a negative effect on sentiment.  Third, BIGresearch released a survey of over 7,000 individuals today that indicating that that ratio of consumers who are confident/very confident in a strong economy was down more than a point from the August reading of 31.1%.  Fourth, while September looks like it will turn out to be a strong month for stocks, it did not get off to a good start.

While energy prices are less of a concern for most consumers today, more of them are focused on other factors such as employment, housing and credit concerns.  If my assessment is right, continued improvement in confidence is not a sure thing. 

Howard W. Penney

Managing Director

A LITTLE LESS CONFIDENT - CC1