Assailed by a welter of conflicting data, US consumers - and the world at large - are becoming increasingly bemused, not to say confused by the surfeit of conflicting output from forecasters, entrail-rakers and other assorted number crunchers.
On New Year’s Eve, Manhattan-based commercial forecaster the Conference Board seasoned the economic cauldron with news that consumers had switched to Cassandra mode in December, its index of confidence (based on consumer expectations) fell from November’s 84.9 to 80.3, hovering just above October’s nine-year low.
The fall reflects growing public jitters about job prospects, with the number of respondents agreeing that “jobs are hard to get” rising from 27.3% to 29.8% – the highest proportion in eight years; while those believing “jobs are plentiful” sank to 12.4% from 14.2%.
Comments Lehman Brothers’ economist Joseph Abate: “The household sector is getting increasingly concerned not only by the geopolitical worries, but by deterioration in the labor market. That's why the Christmas season has been so lackluster.”
Abate then switched from numerology to clairvoyance, predicting a downbeat first half for 2003 with consumer spending curbed by fears over Iraq, North Korea and rising energy prices. He rated at 30% the chance of a backslide into recession before the corners of his mouth twitched upward a hairsbreadth, conceding that the economy should boom in H2 led by increased business investment.
But for every Cassandra there is a Pangloss, a role assigned by the Wall Street Journal to Douglas Lee, president of economics at research firm Washington Inc, who opined: “Political instability in the Middle East … is weighing on consumer attitudes. But when it comes to spending, job security and income are the primary factors.”
Observing that the job market remains stable and that post-tax incomes are growing faster than consumption, Lee’s crystal ball sees consumer spending growth of 2% to 3% – an annual rate that “is really easy to achieve”.
Auto sales for December are expected to remain robust – the sales data are due out January 7 – as is home-buying. But early retail sales data for the holiday season published earlier this week [WAMN: 31-Dec-02] reflects a ho-hum scenario. As to whether the early snapshot reflects the broader retail picture, pragmatic observes will opt to wait and see.
Data sourced from: The Wall Street Journal Online; additional content by WARC staff