TRACKING THE 3Q GDP SCORE CARD

The good news: the Conference Board Consumer Confidence index improved moderately in August from July - the Index now stands at 53.5, up from 51.0 in July.

  1. The Present Situation Index decreased to 24.9 from 26.4.
  2. The Expectations Index increased to 72.5 from 67.5.
  3. Consumers are less confident today as they were a year ago – consumer confidence was at 54.5 in August 2009.
  4. The proportion of respondents saying jobs are “hard to get” increased to 45.7% from 45.1%, while those claiming jobs are “plentiful” declined to 3.8% from 4.4%.

In summary, consumers’ expectations improved moderately in August, but overall most remain pessimistic and there is no improvement in the labor market.  There is nothing in today’s confidence reading that leads us to expect acceleration in consumer spending.

TRACKING THE 3Q GDP SCORE CARD - conf board con conf aug10

Also in the “good-news-for now-and-meaningless-to-3Q GDP” camp is the Case/Shiller data for the month of June.  The data came in strong with a non-seasonally adjusted increase of 1.0% sequentially (+0.3% seasonally Adjusted) and a NSA increase of +4.2% vs. last year, down from +4.6% last month. 

See Josh Steiner’s post for all of the details, but starting next month a roll over in the Case/Shiller data is all but assured.   June’s Shiller data point reflects contract activity for February, March, and April – strong months in the housing market going into the expiration of the housing tax credit.  From Josh Steiner’s post today: “Starting next month, however, February will be replaced by May and the month after that March will be replaced by June and finally April will be replaced by July. As demand dried up in those ensuing months and we would expect to see prices begin to reflect that.”

The bad news: Chicago PMI - the Chicago ISM number fell to 56.7 in August from 62.3 in July, the lowest since November 2008.  With new orders declining to 55.0 in August from 64.6 in July, so does the inventory correction.  Inventories fell to 46.5 from 50.8 in July.  As seen in the chart below, the ISM inventory Index track closely to the inventory contribution to GDP chart we published yesterday. 

Due for release on Friday is the August payroll employment change and unemployment rate, which are likely to be disappointing to current expectations.  According to Bloomberg, the current consensus estimate for the August payroll employment change is (100,000) – a slight improvement from 131,000 jobs lost in July.  As an aside, the news of the MON restructuring is a real-time indicator as to how difficult the job market remains for the unemployed.  The reporting risk to the downside of expectations is in place for an outright payroll contraction in August (net of census impact), with the total jobs lost likely to exceed 100,000.  The consensus also calls for the August headline unemployment rate to be 9.6%, up from 9.5% in July. 

TRACKING THE 3Q GDP SCORE CARD - gdp inventory pmi w 3q est

Howard Penney

Managing Director