Summary
Consumer confidence fell unexpectedly...What gave it away?
When you have unemployment hovering around 10% what should the experts expect?
Analysis
The continuing fall in consumer confidence spells continued trouble for the commercial real estate market especially the Retail sector. The delta between reality and expectations was an astonishing 600 bp.
What is astounding are the pundits that honestly believe the economy has turned the corner because economic readings have seemed to bottom out.
As that may be true from a technical perspective, economic activity, especially as it affects Main Street, is driven as much by emotion as the financial ledgers of the medium to small business community.
As part of today's news there is continued optimism about the housing market because prices have been going up. Of course it's better than housing prices declining, however one has to stop and think about why they are going up.
The answer is twofold, the $8000 new home buyer tax credit and the lenders holding off on foreclosures thereby shrinking the market of available homes.
I'm in touch with several residential brokerages and they are all reporting a decline in the number of listings (inventory). What is going on is an artificial market being created, much like the commercial real estate lenders will try and do.
However at the end of the day, it's still the employment numbers and unless the unemployment rate begins to drop there will be no consumer confidence which means less spending.
In addition with most people's credit cards, home equity lines, and other means to obtain cash having been severely curtailed, the natural tendency is for less spending....which is why I find it astounding how the unnamed pundits are always surprised by lower numbers.
