Americans became more hopeful about the economic outlook in November, pushing consumer sentiment to a five-month high, though they still have a gloomy view of personal finances, a survey released on Friday showed.
Reuters reported it was the third monthly gain in a row for the index, an encouraging sign for an economy where consumer spending accounts for 70% of activity. Even so, sentiment is still at historically low levels, with the index down more than 13 points from a peak in February.
The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment rose to 64.2 from 60.9 the month before, topping the median forecast of 61.5 among economists polled by Reuters.
The survey’s gauge of consumer expectations climbed to 56.2 from 51.8. While respondents were no more positive about the current state of the economy, they were less likely to expect it to worsen in the year ahead, the survey said.
Economists said the lackluster levels underscored the recent disparity between weak sentiment data and stronger spending reports, suggesting dismal consumer attitudes may not reflect their purchases.
“Despite the persistence of low consumer sentiment stemming from negative views of government economic policy, concerns about the European debt crisis, and high unemployment, recent data releases on consumer spending have otherwise been in line with our expectation of continued modest growth in real consumption,” Michael Gapen, economist at Barclays Capital in New York, wrote in a note.
Consumers remained gloomy about their own finances with more respondents reporting their finances had worsened than improved. Just one in five consumers expected improvement in the year ahead.
Worries the United States could be in for another recession pummeled confidence in recent months, as did political wrangling over raising the debt ceiling in the summer. Confidence in policy has yet to recover, with 58% of respondents rating economic policies unfavorably.
“Overall, it is still likely that real consumer expenditures will not be strong enough during the year ahead to enable the higher rates of economic growth needed to offset the negative grip of income and job stagnation on consumer spending,” survey director Richard Curtin said in a statement. “Although improved, a renewed downturn in the economy still has an uncomfortably high probability of occurring.”
Still, vehicle buying plans improved as 60% of consumers said buying conditions were favorable, helped by price discounts.
Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
Bloomberg reported that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
The biggest one-week slump in stocks since 2008 and the downgrade of country’s top credit rating may be exacerbating consumers’ concerns as unemployment hovers above 9 percent and companies are hesitant to hire. Rising pessimism poses a risk household spending will cool further, hindering a recovery that Federal Reserve policy makers said this week was already advancing “considerably slower” than projected.
“We’re really at the bottom of the barrel right now,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. “Americans are feeling an increasing level of frustration with their leaders in Washington. We’re also seeing a slew of weaker than expected economic reports.”
Estimates of 69 economists for the confidence measure ranged from 59 to 66.5, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
A report from the Commerce Department today showed sales at U.S. retailers climbed 0.5 percent in July, the most in four months, indicating consumers are holding up even as employment slows. Purchases excluding automobiles rose more than forecast.
Confidence among U.S. consumers unexpectedly fell in July to the lowest level in more than two years, adding to concern that weak employment gains and falling home prices may keep households from spending.
Bloomberg reported that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.8, the weakest reading since March 2009, from 71.5 the prior month. The gauge was projected to rise to 72.2, according to the median forecast of 62 economists surveyed by Bloomberg News.
Smaller jobs gains, falling home values and concern over the outcome of government debt talks may be jarring Americans, underscoring Federal Reserve Chairman Ben Bernanke comments to Congress earlier this week. The figures raise the risk that household spending, which accounts for about 70 percent of the economy, will continue to cool.
“There’s certainly been a lot of negative headlines, with the very weak employment report a week ago and the ongoing debt limit impasse,” saidJames O’Sullivan, chief economist at MF Global Inc. in New York, who predicted the gauge would fall to 68.0.
Whether the economic recovery in the U.S. can continue could depend on a single factor: consumer confidence.
As reported by USA Today, confidence is important because consumers who are upbeat about prospects tend to spend more, driving corporate profits and job growth. Companies hire more employees, boosting spending, growth and confidence.
Such self-reinforcing loops are the stuff that recoveries are made of, and one reason the current rebound has been so tepid. While the economy has bounced back from a devastating recession, the gains have largely helped better-off households, economic data show. That has left out a huge swath of consumers.
The disparity will play a decisive role in reports on how consumers view the economy. Tuesday, the Conference Board will release its widely followed consumer confidence report for June. In May, it dropped to 60.8 from 66 in April. Since the economy has shown little sign of improvement, it’s likely to indicate further concern. “We have a backlog of Americans who’ve been out of work for two years,” says Ed Farrell, director of Consumer Reports National Research Center. “It’s going to take a strong surge in the economy to pull these people back in.”
According to a monthly survey released last week by Consumer Reports, households that earn less than $50,000 have been extremely downbeat on the economy every month since the survey’s April 2008 launch. Such households make up half of the U.S. population. Meantime, affluent households — those that pull down $100,000 or more a year — have been feeling on average positive about the economy since February 2010.
The primary factor behind the disparity: jobs. Affluent households have seen little impact on job prospects overall. Meanwhile, low-income households have seen a net decline in jobs for 23 out of the past 24 months, according to the survey.
To be sure, the strength in upper-income households has been an important element in getting the economy back on its feet. While just 18% of households earn more than $100,000 a year, they account for slightly more than one-third of all household spending, according to a recent survey by the Bureau of Labor Statistics.
There are other factors behind the improved outlook among upper-income families besides jobs. For one, they tend to own stocks. The market has undergone a substantial rally since early 2008, adding to the so-called “wealth effect.” While the market has taken a hit in recent weeks, it remains well above where it stood two years ago.
The rally has been little comfort to low-income households, which hold few stocks. Instead, high oil prices have dragged on the discretionary income of less well-to-do families.
The performance of high-end retailers vs. discounters highlights the disparity. Upscale retailers such as Nordstrom and Saks have recently posted strong results. Tiffany & Co. reported a 25% jump in its first-quarter net income. The high-end jewelry retailer said even though it had to mark up prices due to higher gold and silver costs, demand hasn’t slackened. Wal-Mart Stores, meanwhile, which caters to cash-strapped families, reported weak first-quarter sales. Others, such as Old Navy and Aeropostale have also been struggling, says David Berman, a hedge fund manager who closely tracks retailers. The recovery “has been a tale of haves and have-nots,” Berman says.
While luxury-goods retailers have seen no slackening from higher costs, the same can’t be said for mid-range retailers and discounters. A surge in materials prices such as cotton has made it more costly for many retailers to produce finished goods. In turn, they’re raising prices.
La-Z-Boy recently boosted its prices to offset higher costs. The company has said demand has already slackened due to high prices at the pump. More expensive recliners could also crimp sales.
One positive sign of late for less-wealthy families has been a drop in oil prices. The turmoil in the Middle East, which triggered a pop in prices earlier this year, has cooled off recently, though hot spots such as Libya remain a concern. Last Thursday, crude prices plunged after the International Energy Agency said its members would release 60 million barrels of crude oil from emergency stocks.
Lower oil prices can provide a meaningful pop to lower-income families. Among households that make $70,000 or less, 5% of their expenditures go toward gasoline and motor oil, while households in the higher-income bracket allocate 3% of their outlays toward fuel.
Consumer confidence rose in February to its highest point in three years as Americans feel more optimistic about their income prospects and the direction the economy is headed, a private research group reported Tuesday (Feb. 22).
The Conference Board says its Consumer Confidence Index climbed to 70.4 this month, up from a revised 64.8 in January, hitting its highest level since February 2008. It was the index’s fifth consecutive monthly increase, the Associated Press reported.
The figure topped economists’ expectations of a reading of 65, according to FactSet.
The strength of the stock market and falling unemployment are lifting Americans’ spirits in spite of rising gasoline and food prices and a still-weak housing sector. In addition, Americans started seeing more money in their paychecks in January after a cut to the Social Security tax, which could translate into stronger spending.
“Since November there has been a gradual improvement in the consumer mood, but it’s not happy days are here again,” says Chris Christopher, an economist with IHS Global Insight. “Household net worth is still about $10 trillion below its peak, and with what’s going on in the housing market now, it doesn’t look like that’s going to improve anytime soon.”
The S&P/Case-Shiller index of home values in 20 U.S. cities fell 2.4% last year, the group said Tuesday, and economists predict foreclosures will increase this year. The Conference Board found that the number of families who plan on buying a home in the next six months fell to 4.4% in February from 5.2% in January.
While consumer confidence is rising, continued troubles in the housing market and other lingering effects of the recession are keeping the index well below the 90-plus readings that signal a stable economy. Confidence fell off a cliff after the U.S. housing bubble burst and the financial crisis took hold in 2007.
The index dropped below 90 in January 2008 and hit an all-time low of 25.3 a year later. While confidence and spending have been inching back up as business conditions improve, Americans are still feeling cautious, especially when it comes to the job market.
Unemployment fell 0.4 percentage points in January after dropping the same amount in December, but the rate remains at 9%, a historically high level. That may be one reason consumers’ assessment of present-day business and employment conditions improved only moderately in February.
Those saying jobs are “plentiful” edged up to 4.9% from 4.6% in January, while those stating that business conditions are “good” rose to 12.4% from 11.3%. However, the number of respondents who said they expect more jobs to be created in the months ahead slipped to 19.8% from 20.8%.
While Americans’ assessment of current business conditions “remains rather weak,” the Consumer Confidence Index is at a three-year high “due to growing optimism about the short-term future,” says Lynn Franco, director of the Conference Board Consumer Research Center.
Consumers’ short-term outlook has improved since January. The share of respondents who expected business conditions to improve over the next six months increased to 24.4%from 24%, while the number who expected business conditions to worsen declined.
Holiday spending surged this year, but Americans still have their doubts about the economy.
With unemployment high and home prices falling in the nation’s largest cities, consumer confidence took an unexpected turn for the worse in December, the Associated Press reported.
The decline followed two months of rising optimism. Economists say the economic recovery is likely to be less fitful next year.
“The modest drop in the confidence index is not worrisome,” said Omair Sharif, economist at RBS Economics Research. “What matters to us — and to the economy — is that consumers are getting out there and spending. We’re looking at the best holiday season for retailers in five years.”
Busy malls in December are a big reason economists are less concerned about the latest consumer confidence figures. There’s also a slew of data that suggest next year will be brighter. Layoffs are slowing, businesses are investing money in computers and equipment, and the stock market has risen to its highest point in two years.
Still, consumers are not quite convinced.
The Conference Board, a private research group, said its Consumer Confidence Index fell to 52.5 in December, down from a revised 54.3 in the November survey. It takes a reading of 90 to indicate a healthy economy. The last time the index was that high was in December 2007, just as the recession began.
Among the 5,000 people surveyed this month, many expressed concerns about jobs. Fewer see them as “plentiful.” More described them as “hard to get.”
The unemployment rate rose to 9.8% in November, and only 39,000 net jobs were created that month.
Chris G. Christopher Jr., senior principal economist at IHS Global Insight, cautioned not to read too much into one report. A downward trend over several months would be more worrisome.
Same goes for the holiday sales data, which showed shoppers spending at the fastest pace since 2006. Key areas such as jewelry, home furnishings and consumer electronics are still below pre-recession levels. Many retailers offered discounts on holiday merchandise starting in late October and free shipping to lure buyers back.
Christopher will have a better sense of consumers’ mood when he sees how they spend after the holidays.
“There was a lot of unleashing of pent-up demand,” Christopher said. “Things are getting better, but there are still lot of negatives.”
The biggest may be the decline in home prices in the largest U.S. cities. Every city in the Standard & Poor’s/Case-Shiller 20-city home price index posted a decline from September to October. The last time that happened was in February 2009.
Prices are expected to keep falling through the middle of next year, as fewer people purchase homes and millions of foreclosed homes come on to the market.
This year is on pace to finish as the worst for home sales in more than a decade. High unemployment and tight credit have kept people from buying. And that’s despite some of the lowest mortgage rates in decades, which have recently begun to spike.
Many people are holding off on purchases because they fear the market has not hit bottom, analysts say.
Buyers aren’t just skittish in the hardest-hit cities, such as Las Vegas or Phoenix.
Home prices in Atlanta have fallen 6% in the last four months. That’s the worst decline among the 20 cities in that time, and it erases gains made in the spring, when the government offered home-buying tax credits.
Home prices in Dallas, Portland, Ore., Charlotte, N.C., Tampa, Fla., and Denver have fallen for four straight months.
Neither the dip in confidence nor the drop in housing prices caused economists to back down from their more optimistic outlook for 2011.
Stronger spending by consumers will help the economy grow faster in 2011. Some experts predict growth will clock in at around 4%, which would mark the fastest pace in 11 years and an improvement from the 2.8% pace projected for this year.
For economists, what’s most important is what consumers do, rather than how they feel.
“People are saying they are still worried,” said Joel Naroff, president of Naroff Economic Advisors. But those same consumers “have hit the malls pretty hard.”
Editor’s Note: Robert W. Baird & Co. distributed a client newsletter following release on Wednesday of the preliminary fourth-quarter and year-end results for Thor Industries Inc. Excerpts from Baird’s newsletter follow.
Maintain Outperform rating. Thor reported strong revenue for its July quarter, and continues to see healthy retail growth supported by share gains. Backlog fell as expected, but remains at an appropriate level for anticipated demand. We consider valuation attractive, despite concerns over weak consumer confidence and unfavorable tax policy, and maintain our outperform rating.
Preliminary sales above expectations. Thor reported preliminary sales for the July quarter, following its customary procedure. Sales grew 51% to $664 million, above our $576 million estimate ($617 million consensus). RV sales increased 67% to $564 million, above our $459 million estimate. Bus sales fell 3% to $100 million, well below our $117 million forecast, as stimulus funding slows.
Backlog down but remains healthy. Management reported backlog down 17% to $489 million. RV backlog fell 13% to $261 million, while the Bus backlog was down 21% to $228 million. Stronger production and shipments in the quarter (nearly $50 million in revenue upside versus consensus) contributed to the falling backlog, as Thor worked to fulfill a previously unsustainable backlog. Management believes the current backlog is appropriate for the current level of demand. The backlog represents 89% of October-quarter revenue – historically, the backlog represents 80-90% of next-quarter revenue.
Strong retail on share gains. Retail is tracking with our expectations. Thor reported growth at retail in June and July despite weakening consumer confidence. Thor is taking share at retail, a trend we expect to continue (with help from the new Redwood brand). Management expects industry retail growth of 10% in 2010 and 2011, but expects to drive stronger results on improving market share.
Outlook. We remain concerned about weak consumer confidence and the impact of tax policy on discretionary wealth, but see good value here, noting $5/share in cash.
People attending retail RV shows in growing numbers across North America so far this year may be contradicting the prevailing mood of the American public. Reports from major retail shows indicate strong attendance numbers and, in most cases, better sales results than last year.
Then along comes Tuesday’s (Feb. 23) report on consumer confidence to make one wonder: what’s going on here?
Americans’ outlook on the economy went into relapse in February. Rising job worries sent a key barometer of confidence to its lowest point in 10 months, raising concerns about the economic recovery, according to the Associated Press.
The Conference Board said its Consumer Confidence Index fell almost 11 points to 46 in February, down from a revised 56.5 in January. Analysts were expecting only a slight decrease to 55. It was the lowest level since the index recorded a 40.8 reading in April 2009.
The increasing pessimism, which erased three months of improvement, is a big blow to hopes that consumer spending will power an economic recovery. Economists watch the confidence numbers closely because consumer spending accounts for about 70% of U.S. economic activity.
The February reading is a long way from what’s considered healthy: A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.
“It still feels like a recession,” said Lynn Franco, director of The Conference Board Consumer Research Center.
The drop is likely to raise pressure on the Obama administration and Congress to move faster on job creation measures.
President Obama said earlier this year that jobs would be his top priority. But legislation to stimulate hiring has yet to be approved. That delay and continued wrangling over health care reform might have contributed to the drop in confidence, some analysts said.
The Senate is expected to approve today a modest $15 billion jobs bill that would give employers tax breaks if they hire new workers.
While economists said heavy snowstorms in many areas of the country that shut down businesses dampened confidence, many believe that the report confirms that consumers aren’t feeling the nascent economic recovery.
“More than six months after the recovery started, consumer confidence is still close to a record low,” said Paul Ashworth, senior U.S. economist at Capital Economics Ltd. “Without a sustained acceleration in consumption growth, this recovery will eventually fade.”
The news sent stocks lower, overshadowing retailers’ reports that showed stronger holiday profits but little improvement in sales.
One gauge, measuring consumers’ assessment of current conditions, dropped to 19.4 from 25.2, the lowest level since 1983. The other barometer, which measures their outlook over the next six months and had been rising since October 2009, fell to 63.8 from 77.3.
The Consumer Confidence Index hit a historic low of 25.3 in February 2009 but then enjoyed a three-month climb to 54.8 in May, fueled by signs the economy might be stabilizing. Since then, it has been mired in a narrow range, dropping as low as 47, as rising unemployment took a toll, before climbing again for a three-month stretch.
February’s reading is well below the 61.4 figure in September 2008, when the financial crisis intensified with the collapse of Lehman Brothers. The index has had an average reading of 95.6 since the Conference Board starting tracking the figures in 1967.
“The combination of earnings and job anxieties is likely to continue to curb spending,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
The downbeat report on confidence came amid encouraging news about the housing market. According to a key housing index, also released Tuesday, home prices rose for the seventh straight month in December, a sign of price stability as the U.S. housing market continues its bumpy recovery.
The Standard & Poor’s/Case-Shiller 20-city home price index rose 0.3 percent from November to December, to a seasonally adjusted reading of 145.87. The index was off 3.1 percent from December last year, nearly matching analysts’ estimates that it would fall by 3.2 percent.
But a solid job market is critical to consumers’ boosting their spending and the overall of health of the economy.
The overall economy expanded at an annual rate of 5.7% in the fourth quarter, but only about one-fourth of that growth came from consumers. That marked the second quarterly increase in a row after four quarters of decreases.
Many economists expect new jobs to be created in coming months. Unemployment fell to 9.7% in January from 10% in December, and employers shed 20,000 jobs. But they still worry that joblessness will climb back up by next summer as unemployed people who abandoned job searches start trying again.
The U.S. consumer confidence index unexpectedly rose to a 16-month high of 55.9 in January from a revised 53.6 in December, the Conference Board announced Tuesday (Jan. 26).
A Bloomberg News economists’ survey had expected the index to rise to 53.5 in January, according to Daily Finance. The index was at 50.6 in November, and hit a record low of 25.3 in February 2009. (Base year, 1985=100.)
But the boost should not have come as a surprise, as the bellwether RV industry has been predicting this upturn for weeks.
Traffic and sales at the early retail shows so far this year have been strong, according to industry sources. And earlier this week, the Recreation Vehicle Industry Association (RVIA) reported that wholesale shipments to retailers in December rose 150% in a year-over-year comparison.
A More Positive View
Lynn Franco, director of the Conference Board’s Consumer Research Center, said the confidence index reflects consumers’ better view of present-day conditions. “Consumer confidence rose for the third consecutive month, primarily the result of an improvement in present-day conditions. Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months,” Franco said, in a statement. “Regarding their financial situation, while consumers were less dire about their income prospects than in December, the number of pessimists continues to outnumber the optimists.”
In addition, consumers’ assessment of current conditions was slightly more favorable in January. Those claiming business conditions are “bad” increased slightly to 46.1% in January from 45.1% in December, while those claiming business conditions are “‘good” increased to 9.0% from 7.5%.
Also, consumers’ assessment of the job market was slightly more favorable compared to last month. Those saying jobs are “hard to get” decreased to 47.4% in January from 48.1% in December, while those claiming jobs are “plentiful” increased to 4.3% from 3.1%.
Consumers’ short-term expectations were somewhat mixed in January, the Board said. Consumers expecting business conditions to improve over the next six months decreased slightly to 20.9% in January from 21.2% in December, while those expecting conditions to worsen increased to 12.7% from 11.8%. However, those expecting fewer jobs dropped to 18.9% from 20.6%. Finally, those expecting more jobs to become available in the months ahead declined to 15.5% from 16.4%.
Investors should pay attention to the Consumer Confidence Index because, historically, consumer spending has accounted for about 60% to 65% of U.S. GDP. Moreover, rises in consumer confidence are directly correlated with increases in consumer spending. Hence, if confidence rises, and a trend forms, that most likely means good things are ahead for corporate revenue and earnings.
The key take-a-ways from the January consumer confidence report concern the larger-than-expected increase in the top-line confidence stat, and the nearly year-long uptrend. Both are bullish signs for the U.S. economy and the stock market, and a larger theme is also evident: Consumers are becoming more confident, but there’s one dimension of the economy that has prevented the index from recording even more impressive gains — concern about the lack of new jobs and the nation’s high unemployment rate.
Bottom Line: The American people will need to see tangible signs of sustained job growth, with rising, real incomes, to keep consumer confidence heading higher.
A closely watched report today (Sept. 29) on consumer confidence is expected to show modest improvement, but some economists are heartened by a more obscure measure of buyer sentiment: recreational vehicle sales.
RV wholesale shipments jumped 16% in August from July to a seasonally adjusted annual rate of 209,800, the Recreation Vehicle Industry Association (RVIA) reported.
While that’s about half the industry’s torrid sales pace in 2006, it’s a 136% surge from January. The trade group predicts 146,200 shipments in 2009 and a 27% increase in 2010, according to USA Today.
Sales of motorhomes and travel trailers are seen by some economists as a leading indicator of the economy’s health, because they’re among the largest discretionary purchases a consumer can make.
Trailers cost about $6,000 to $60,000, while motorhomes — which include a living space within a vehicle — typically fetch $50,000 to $300,000. About 8% of U.S. households, mostly families and retirees, own an RV.
RV sales began dipping in early 2007, many months before overall retail sales declined and the recession’s start in December of that year. In recoveries, RV sales often heat up early, as buyers who put off purchases grow optimistic enough to open their wallets.
“Prospects that we talked to a year ago, even in spring of 2008, are now beginning to come out and buy,” said Scott Hayden, president of Driftwood RV, the largest RV retailer in New Jersey.
After plunging by a third in 2008 and early this year, Driftwood sales in September are 15% ahead of a year ago and up 4% vs. September 2007.
Industry officials attribute the rebound to improved credit for dealers and consumers, low dealer inventories and stable fuel prices. The big driver is rising buyer sentiment, which could augur more robust retail sales than predicted.
“It would suggest the worst of the (stock market) decline seems to be over, and the consumer is in a position to come back,” said Indiana economist Morton Marcus, who studies the RV market.
Some economists put less premium on RV sales. Wells Fargo’s Mark Vitner says buyers are likely retirees who deferred purchases, a trend that won’t extend to other big-ticket items, such as cars.
Economists’ consensus forecast for the September consumer confidence report today indicates that the Conference Board’s index rose this month to the highest level in a year but is still well below normal.
Businesses reduced inventories at the wholesale level for a record 11th consecutive month in July, although sales rose by the largest amount in more than a year, sparking hope for better days ahead, the Associated Press reported today (Sept. 11).
The report mirrors recent developments in the RV industry, whose forecaster Richard Curtin also is reporting a gradual upturn following a two-year decline.
Economists expect that some modest restocking triggered by the higher sales helped boost the economy out of recession in the current quarter. Some analysts said the economy could rebound to growth approaching 4%, after it fell at a 1% rate in the April-June period.
The Commerce Department reported today that wholesale inventories declined 1.4% in July, more than the 1% drop economists expected. That decline followed a 2.1% fall in June, worse than the 1.7% drop originally reported.
Sales at the wholesale level rose 0.5% in July, the fourth consecutive increase and the biggest gain since a 2% jump in June 2008.
Jennifer Lee, an economist at BMO Capital Markets, said the rebound in sales was encouraging and should help convince businesses to restock their shelves and back lots. That swing in inventories should play a major factor in boosting the economy out of a recession in the current quarter.
The overall economy, as measured by the gross domestic product, will grow at a 3.8% annual rate in the current July-September period, Lee forecast. The economy posted declines of 5.4% and 6.4% in the fourth and first quarters respectively, the worst performance in a half-century.
“For the second half of this year, things are looking better than they were a few months ago with activity being helped by stimulus efforts such as the Cash for Clunkers program,” Lee said.
Economists are worried, however, that the economy will slip back to weaker growth beginning next year as the impact of various stimulus programs dims and the unemployment rate keeps rising, depressing consumer incomes and their willingness to spend.
Still, more positive news came Friday when consumer confidence, as measured by the University of Michigan-Reuters survey, rose more than expected to a reading of 70.2 in early September, compared with 65.7 in August.
“With hope comes more spending and with more spending comes more production,” Lee said.
Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.
The July inventory drop left the inventory to sales ratio at 1.23, meaning it would take 1.23 months to exhaust stockpiles. That was slightly lower than the 1.25 ratio in June, but still above the 1.13 inventory to sales ratio of a year ago.
The rise in sales at the wholesale level come amid continued weakness at many retail establishments, which reported lackluster back-to-school sales in August. However, automakers saw a spurt in activity from the government’s clunkers program.
Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. all reported increased sales in August as consumer snapped up their fuel-efficient models. But rivals Chrysler Group LLC and General Motors Co., which have just emerged from bankruptcy protection, saw their sales fall for the month.
The 11th straight drop in wholesale inventories is the longest stretch on records that date to 1992, surpassing the old mark of nine straight decreases from June 2001 to February 2002, a period that covered the last recession.
U.S. consumer confidence soared in May to its highest level in eight months as severe strains in the labor market showed some signs of easing, though Americans’ moods remained depressed by historical standards.
The Conference Board, an industry group, said today (May 26) its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003. Economists had been looking for a much smaller rise to 42.0, according to Reuters.
The report confirms anecdotal reports from within the RV industry in recent weeks and will be good news to manufacturers of consumer goods including RVs, autos and power boats who have struggled through hard times for months.
Fewer Americans said jobs were “hard to get,” the survey found, with that measure slipping to 44.7% from 46.6% . Those saying jobs were plentiful climbed to a still meager 5.7%, but that was still higher than April’s 4.9%.
“Consumers are considerably less pessimistic than they were earlier this year,” said Lynn Franco, director of The Conference Board’s Consumer Research Center.
The data was in line with other evidence suggesting that, while the economy continues to contract in the current quarter, the pace of deterioration has abated somewhat.
U.S. stocks extended their rally after the data, with the Dow Jones industrial average up 120 points or 1.5%.
The survey offered mixed messages regarding Americans’ propensity to spend money. The proportion of those who said they planned on buying a car over the next six months rose to 5.5%, its highest in at least a year.
But fewer intended to buy homes — only 2.3%, a tough break for one of the hardest hit sectors in the country’s economic crisis. A separate report today revealed U.S. home prices dropped 18.7% in March compared to a year earlier.
A proverbial spring thaw in consumer spending is being hinted at in a number of key economic surveys getting widespread media coverage, according to RV Today Express, a publication of the Recreation Vehicle Industry Association (RVIA).
According to the University of Michigan Survey Research Center, consumer confidence rose in late April to post the first year-to-year increase since July 2007. The Conference Board’s Consumer Confidence Index also rose in April to the highest level so far this year, driven by significant improvement in the short-term economic outlook.
The Conference Board’s index of leading economic indicators posted its biggest gain since November 2005. Federal Reserve Chairman Ben Bernanke told Congress early in May that consumer spending appears to be stabilizing and he expects the economy to pick up later this year. The latest Moody’s monthly job report shows the pace of job loss has slowed, and home sales are rising.
President Obama used the phrase “green shoots” to describe the new signs of growth this spring. He pointed to the improving access to small business and consumer loan financing, for which RVIA has been lobbying hard. The more favorable economic prognosis seems to be carrying over into the RV industry, as some companies announce renewed production and even worker callbacks.
RVIA President Richard Coon said, “it’s not yet time to breathe a sigh of relief, as economic indicators are still well below levels associated with strong growth. It is, however, a key time to stay as visible as possible in the marketplace.”