Free Markets, Free People


Consumer confidence dives in June

If you were wondering why the stock market tanked yesterday, look no further than June’s consumer confidence numbers.  Not good:

The Consumer Confidence Index came in at 52.9 in June, a jarring decline from 62.7 in May, according to a survey released Tuesday by the Conference Board, a private research group. It was the biggest drop since February and came on top of several gloomy economic developments in recent days.

Those “gloomy economic developments” of recent days include a 1Q GDP of 2.7%, housing sales that dropped 33% and unemployment numbers that while a tiny bit lower, showed nothing to indicate employers are hiring.  Now consumers are indicating that they’re not willing to buy much of anything at the moment.  That all adds up to bad news for the recovery – if in fact, we’re actually in one.

And the future isn’t looking much brighter:

In another troubling sign, forecasters expect U.S. auto sales to decline for June after growing every month since January. The Conference Board’s report showed that fewer people surveyed plan to make many major purchases, from homes and autos to refrigerators, over the next six months.

Again, not a good sign.  In fact, what it is a sign of is something we’ve all been fearing:

"The more evidence that we get that consumers are losing their confidence and growing more tentative about things, the odds of a double-dip recession start to rise a little bit," said Tim Quinlan, economist at Wells Fargo.

Indeed.  Wait … wasn’t all that stimulus money supposed to fix this?

~McQ

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14 Responses to Consumer confidence dives in June

  • From the Fed comes these words of wisdom …

    “Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

    • That’s a good one.

      Economics isn’t that hard if you don’t try to pretend to know things that you can’t.

      That, again, is the very essence of the “knowledge problem” as described by Hayek. In the extended order, knowledge is diffuse. Every buy-sell transaction relies on information that cannot be gathered to a central location. A billion such transactions can show trends, but the information is still best at the point of transaction, and even the buyer and seller might not be able to state all of the information because it accumulates for them at the point of a best estimate of what their individual and unique needs are at that moment.

      So, economists can spot macro-trends, but they are only pretending if they believe those can be manipulated from a central position. This is the objection to the Fed as central banker. It has near-in objective limits beyond which it is just guessing, and its guesses are basically coin flips.

      The markets, meanwhile, are vast networks of very highly informed buy-sell transactions, and when those transactions are distorted by artificial manipulations (like the effect of Fannie and Freddie activity on housing) you get huge blow-outs rather than the usual boom-bust cycles.

      The macroeconomic temptation in the face of the knowledge problem is like trying to manipulate the weather. It’s more or less sorcery. Not every buy-sell operation in the vast market network is going to be a winner. Failure is everpresent in the markets. But the distortions created by the Fed or the government in an attempt at macroeconomic manipulation beyond very limited parameters is a recipe for catastrophe, and what we have is a catastrophe.

      Front page of the New York Times, today, headline: “Bet on Private Sector for Recovery Could Prove Risky.”

      That’s precisely the opposite of what is true. Having a central plan is a risky bet. It’s a bet that can never be based on sufficient knowledge. Whereas it is precisely the private sector where risk is dispersed over billions of bets, some good and some bad, but based on much closer information at the point of transaction. Not a single centralized bet that is by its nature always going to be wrong, and comes as a series of bets that continuously distorts the radically dispersed bets of the market.

      The writer of that article is David Leonhardt who last year compared Obama’s economic policies to “successful” 1930s German National Socialism. An insane assessment he could have been disabused of had he taken Hayek in hand for an afternoon. It was, the Nazi program, as it had to be, a system of ever-increasing compulsion.

      So, draw the line from Leonhardt last year to today’s headline, and there’s the learning curve of informed elitists on the economy: flat.

    • “Economics is hard.”

      Horse hockey. What’s hard is trying to figure out all those Rube Goldberg investment schemes created by those financial wizards. You know, those derivatives and such that have brought such prosperity to the world, or at least the financial wizards and economists. Or accounting for all those Enron-style debt-to-asset conversions. 

      Economics, as any child knows, says you cannot create wealth by shuffling paper. The economics and financial professions disagree.

      I have always found it strange that all the economic laws and theory that you learn as an undergraduate don’t seem to apply once you get to graduate school. Supply and demand? Not relevant to the real world of complex financial instruments. Diminishing returns? What nonsense!

      Economists have become todays alchemists, creating gold from lead, selling themselves like lawyers to the highest bidder.

  • Wait … wasn’t all that stimulus money supposed to fix this?

    Well, we’re certainly in a fix now, stimulus or no.  More to the point, I wonder if the credits offered to buyers of homes and automobiles are not also an example of a cure that is worse than the disease.  And with congress pushing aside the budget until after the November mid-terms, it shouldn’t be any surprise that the economy remains stalled (to put it mildly).  The scariest part, for me, is the probability that there are still plenty of bad ideas that can be put into practice that will simply make things even worse.

    • The twenty-year IT boom that started in the mid-1980s and was reinvigorated when the internet took hold has settled in as a status quo. It’s not the economic dynamo that it was, both as itself and as a productivity tool. That boom was what masked the crap that was building on the government side of the equation, and the killer there is the predominance of public employee unions, especially in the states and their cities and municipalities. They now constitute an American nomenklatura and they are dug in bigtime.

      That, of course, rests in the backdrop of the huge federal entitlement programs. This idiot administration’s approach to that was to…create another huge federal entitlement program.

      The Stimulus was just a big political payoff. Obama and the gang rushed that through before anyone could take a look at it, but the public employee unions got theirs, for the time being. Public sector employment grew. Private sector employment crashed.

      It would be a joke if it wasn’t a tragedy.

      Investment leads strong recoveries because investment is capital formation and informed risk, and that, you know, is like where, man, prosperity comes from. Even the public employees and their unions depend on it.

  • That’s precisely the opposite of what is true. Having a central plan is a risky bet.

    It’s risky because anything else is merely with the establishment elite wants, not the other 299 million of us.

  • And the dumbasses in Washington continue to screw with – Health Care, Cap & Trade, Wall Street, Taxes.

    And they wonder why the American public is, um, not optimistic….Things are already in the crapper and the public looks over their shoulder and there’s Barney and Nancy and Harry and Barack, headed their way with buckets of stuff that smells ‘off’.

  • The Obami seem hell-bent on doing the precise OPPOSITE of what anyone with a brain would do.  Obama himself cannot manage to open his mouth without saying something that seems calculated to damage business and economic vitality here.
    This regime spins off uncertainty like cotton candy, and capital HATES uncertainty.
    There isn’t a chance in hell we are going to see a recovery any time soon.

  • Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.

    http://online.wsj.com/article/SB10001424052748704629804575325233508651458.html?mod=rss_opinion_main

  • The Consumer Confidence Index came in at 52.9 in June, a jarring decline from 62.7 in May, according to a survey released Tuesday by the Conference Board, a private research group. It was the biggest drop since February and came on top of several gloomy economic developments in recent days.

    Hey, that’s just in time for the Summer of Recovery!  So, when it zooms / rockets / leaps / other MiniTru rah-rah verb to a big, big 55 in July… why, that’s just proof of how well the Stimulus worked, and why we need another one!

    In other news, the chocolate ration was increased from 30 grams to 20 grams.  This announcement was met with spontaneous and irrepressible demonstrations of joy and gratitude to The Dear Golfer among union workers, journalists, academics, and other lefties who still have jobs or else blame their unemployment on Bush.