Last week I asked this question: “Home prices down, the market down, the European debacle, a massive natural disaster and the no confidence vote for incumbents is in the books.  Are you feeling any better about the world?”


Today we got our answer; according to the Conference Board Consumer Confidence Index, confidence among U.S. consumers increased in May to the highest level since March 2008.  The Conference Board's confidence index rose to 63.3 from a revised 57.7 in April, even exceeding the highest estimate in a Bloomberg News survey.  The consensus estimate was for a reading of 58.5.  According to the Conference Board pessimism is fading, as its measure of expectations surged to the highest level since August 2007. 


While the official U.S. unemployment rate rose nearer to the 10% mark in April, the Conference Board data suggest that most consumers are still holding out for better days as far as the job market is concerned. 


While consumer expectation may have improved in the month of April, it’s likely to be short lived; 


(1)    Europe's debt crisis punishing stock prices

(2)    Lower equity prices are bad for the balance sheet

(3)    Last week’s Initial jobless claims number suggests the unemployment rate is headed higher

(4)    GDP growth is slowing

(5)    Housing prices are declining (but mortgage rates are low) – Shiller says outlook “uncertain”

(6)    The gulf oil spill is depressing

(7)    “The bear market is upon us” - Keith McCullough on the Hedgeye AM call - 5/25/10

(8)    Rasmussen has Obama’s approval rating near an all time low at -20


I will be interested to see if consumer confidence can defy the gravitational pull of the factors outlined above.  The chart below shows the S&P vs consumer confidence.  Thus far, May Showers doesn’t seem to have impacted consumer confidence too much.  The Conference Board said today that May 18th was the cutoff date, meaning that the May 6th “Flash-Crash” was taken into account.  Consumer Confidence is being cited as a positive data point by the media today; while this is true, I don’t see it sustaining these levels. 


Howard Penney

Managing Director





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