Let’s discuss the following three charts that matter for investors, both in the near-term and the long-term. Tuesday, the Conference Board posted consumer confidence numbers that were at the highest level since August 2007. The headline number was impressive, and the selloff even paused for a couple of minutes, but the Expectations Component, up for the first time in four months, was the bright spot.
However, with industrial companies in a prevent-defense mode looking to protect share prices rather than invest in their businesses, it is up to the consumer to save the day.
Lost in this rollicking week are signs that maybe Main Street will step up to the plate. Gas prices had their first up day in months, but it served as a reminder of how far they have fallen. At some point, cheap gas has to have a positive impact on the economy.
Obviously, it is having an amazing impact on consumer confidence.
Now, there are signs the needle on household income is finally moving in the right direction. Sentier Research published its employment analysis showing December wages up 3.3% from a year ago, and 1.4% from November. It is the best one-month jump since October 2006.
However, we should note the $54,417 household income is well below the $56,237 household income in December 2007.
New home sales came in well above consensus, even as prices climbed to $298,000 from $275,000 one year earlier. Perhaps, driving this phenomenon of price is the demand and supply ratio; there is not a lot of supply. Still, in the end, homebuilders could not jack up prices if buyers are not paying.
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Moreover, it would be something if consumers saved the day; maybe they will. The idea is fraught with risk of more leverage, borrowing and spending above their means- but it just might happen.
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