Is the latest consumer confidence release yet another example of elite disconnect? One of the things that has become striking is the degree to which the chattering classes in New York and Washington DC seem utterly unaware of what is happening in the rest of the country. New York City is doing reasonably well based on the heroic efforts by the officialdom to prop up the major capital markets firm; DC is recession immune and more recently awash in lobbying funds. The influences range from visual signals (I had a friend visiting from Boston remark how striking it was that there were so few shuttered storefronts here in NYC) to continued Administration cheerleading (a constant since the 2009 bank stress tests). And since major media stories about the economy are driven by sources in these two cities, it feeds into business reporting.
We’ve had seven weeks of initial jobless claims over 400,000, unemployment stable only by virtue of more exits from the workforce, high oil prices, rising food prices, and housing prices in pretty much every area of the US continuing to fall with no prospect of relief. The Bloomberg story on the latest consumer confidence figure managed to separate the degree of the miss by supposed experts. This bit comes a full sixteen paragraphs into the story:
Estimates for consumer confidence ranged from 60 to 71 in the Bloomberg survey of 68 economists. The measure averaged 98 during the expansion that ended in December 2007.
This is the start of the story:
Consumer sentiment unexpectedly decreased in May to the lowest level in six months as Americans grew concerned over the outlook for jobs and the economy, while a measure of home prices dropped to a nine-year low.
The Conference Board’s confidence index dropped to 60.8 from a revised 66 reading in April, figures from the New York- based private research group showed today. Home prices decreased 5.1 percent in the first quarter from the same time in 2010, according to data from S&P/Case-Shiller. A separate report today showed manufacturing cooled.
The release came in at the very bottom of the estimates made by a very large number of economists (a more typical Bloomberg survey is in the teens to twenties). So the gap between the forecasts and the results points to a serious miss. And note weakening home prices aren’t a surprise; these results, and the continued pushing out the time frame for “when is housing going to bottom” which was deemed to be 2011 but the seers are now moving to 2012, have been in the news for weeks. Yet we see more optimism in the story:
The economy has slipped into a soft patch,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “In the second half, we’ll do better than we’ve been doing. As economic activity picks up, the labor market will improve as well.”
With Federal, state, and local budget cuts in the offing, what in the private sector can compensate? A weakening dollar will help, but it will take time for manufacturing to return to the US, and in the meantime, a soft dollar (ex other factors) will make oil prices worse, putting more immediate pressure on consumer budgets and mood.