Tomorrow’s News Today
Posted June 21, 2010The economy: Economic growth falters in June. There is a four-point decline in the Consumer Balance Index, largely reflecting a decrease in the percent of consumers with the “Strongest” financial balances: that is the ratio of assets and income to debt and spending. The percent of consumers who say the economy is getting worse increases four points from 42% in May to 46% in June.
Also, the percent of consumers who fear they or another member of their household will lose their job or have their working hours reduced jumps five points from 49% in May to 54% in June.
Inflation: Fear that inflation will accelerate diminishes. The percent of consumers who believe prices will rise at a steeper rate drops from 34% in May to 23% in June. The percent who believe interest rates will be higher six months from now drops from 61% in May to 48% in June.
Consumer spending: The index tracking active shopping for new cars, housing and other big ticket items drops from 110 in May to 96 in June. This 14-point decline reflects a four-point decline in the percent of consumers actively shopping for new cars, a five-point decline in active shopping for used cars, and a four-point decline in the percent of consumers actively shopping for a personal computer.
Despite the end of the housing tax credit and the general pull back on active shopping for big ticket major goods, active shopping for housing ticks up a point.
The index tracking propensity to spend freely for food, clothing, and other consumables is up ten points from 73 in May to 83 in June.
Equity prices: Stock prices continue to be unstable and to fluctuate widely in response to the news of the day. Investors are strikingly less willing to buy stock in June than was the case in May in the event of a 10% decline in the Dow. The number of prospective buyers to prospective sellers in the event of a 10% decline in the Dow moves down from 1.68 in May to 1.11 buyers in June.
Politics: Obama’s approval rating drops from 48% in May to 44% in June, giving up all but one of its six-point gain from 43% in January to 49% in February. Fewer Americans spontaneously name “health care” as a major national problem (12% in May to only 8% in June). Mention of unemployment as a major problem also drops, from 45% in April to 35% in May to 34% in June.
In January, the Republican and Democratic Parties had been running close to neck-and-neck, with 39% leaning Democratic and 37% leaning Republican. In April, Democrats outnumbered Republicans by 14 points: 47% Democratic to 33% Republican.
In May, the gap between the parties narrowed to 11 points, with 45% of Americans leaning Democratic and 34% leaning Republican. In June the gap in favor of the Democratic Party narrowed again to five points: 39% Democrats and 34% Republican.
The Democratic Party’s success in enacting federal legislation over the objections of the Republican Party has invigorated opposition to the Democratic Party—witness the Tea Party’s growth and its success in winning Republican Primaries.
The issue of state’s rights versus the rights of the federal government is again front and center as Americans resist tyranny by a majority.
The Democratic Party can look forward to being forced to listen to the opposition and effect compromises to enact legislation. Given the durability and utility of the U.S. Constitution, which is a product of compromise, this may force a more careful review of issues and result in the making of better decisions.
(For details on the role and value of compromise in the governing of the United States, see Appendix D of “Pursuit of Happiness in the Grazing Society”)
BACKGROUND NARRATIVE & STATISTICS
The grip of the recession tightened between April and May and tightened again between May and June. The CONSUMER BALANCE INDEX (CBI), which tracks consumer perception of their ability to sustain their current rate of spending by assessing their financial balance—income and assets versus debt and current spending rate –dropped two points from 87 in April to 85 in May and another four points between May and June, giving up the six points it had gained between January (CBI 81) and April (CBI 87).
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Consumer Spending
In line with the decline in the CBI, which indicates consumers feel less able to afford sustaining their current rate of spending, the index tracking active shopping for new cars, housing and other big ticket items drops fourteen points from 110 in May to 96 in June.
The sharp decline in active shopping for major goods reflects a five-point decline in the percent of consumers shopping actively for a used car, a four-point decline for those shopping for a new car, and a four-point decline in the percent actively shopping for a personal computer.
With consumers less concerned about budgeting to manage big ticket expenditures, the index tracking willingness to spend freely for food, clothing, gasoline, and medical expenses increases from 73 in May to 83 in June.
CONSUMER SPENDING: April, May, & June 2010
(1,506 telephone interviews of which 502 were conducted in April 2010, 503 in May 2010 and 501 in June 2010)
| April 2010 |
May 2010 |
June 2010 |
Diff. May-June |
||
| Willingness to Spend Freely for Consumables: | |||||
| INDEX | 73 | 73 | 83 | +10 | |
| Percent Spending Freely For | |||||
| Food | 38% | 36% | 41% | +5 | |
| Clothing | 32% | 33% | 39% | +7 | |
| Gasoline | 41% | 43% | 51% | +* | |
| Medical Services | 64% | 65% | 70% | +% | |
| Active Shopping for Major Goods Index | 109 | 110 | 96 | -14 | |
| Percent Actively Shopping For… | |||||
| New Car | 6% | 8% | 4% | -4 | |
| Used Car | 8% | 9% | 4% | -5 | |
| House | 9% | 5% | 6% | +1 | |
| Furniture | 10% | 9% | 11% | +2 | |
| Personal Computers | 10% | 10% | 6% | -4 | |
| Major Appliances | 8% | 10% | 8% | -2 | |
| New Carpeting | 4% | 5% | 3% | -2 | |
| Color TV | 8% | 10% | 8% | -2 | |
| Air Travel | 21% | 18% | 18% | - | |
| Overnight Hotel/Motel | 19% | 20% | 21% | +1 | |
Equity Prices
Consumers who own stocks directly or in mutual funds became less confident about the future prices of equities between May and June.The number of prospective buyers to sellers of stock if the Dow declinedby 10% decreased from 1.68 buyers per seller in May to only 1.11 buyers per seller in June.
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Comment
The stock market has been highly volatile during the past several weeks, reacting violently to the news of the day—which is reported in “real time”—and simultaneously reacting tonews about economic and business indicators that are reported in “batch time” to reflect what happened during the full month.
The June 8Sages.com posting should be read as a “real time” report on what has already happened in the first ten days of June. If June continues on the course it has taken during its first ten days, the “batch time” reports on what happened to the economy during the full month of June that will become available in July will tend to be negative.
Longer term, economic growth is poised to explode with the end of the Great Recession and the resolution of war.
For a discussion of the coming boom in the economy and the changes in the structure of the economy now in progress, request a free copy of the Synopsis of the forthcoming book titled “The Pursuit of Happiness in Today’s Emerging Grazing Society.”Expect a delay of up to two weeks in receiving the Synopsis.
TO ASK QUESTIONS, request detailed data, make suggestions or offer projections of the future, phone Leo J. Shapiro, CEO, SAGE: Survival and Growth Enterprises LLC. He can be reached in Tucson at 520-878-0188 or Chicago at 312-321-8114.
Copyright May 2010 by Leo J. Shapiro – All Rights Reserved.