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Friday, September 28, 2012

Rosenberg Daily - Consumer Confidence, Housing, Corporate Hiring, and... Housing

[M]uch has been made of the boom in consumer confidence in September. The Conference Board's version did jump to 70.3 from 61.3 - wow. the highest since last February...to put 70.3 in
perspective. the consumer confidence index averages 78 in recessions and 102 in expansions.

Even with a stock market that has more than doubled off the lows and now a multi~month rebound in real estate values, here is the reality. Only 8% of the epic (35%) peak-to-trough slide in national home prices has been reversed so far....the level of household net worth today is still almost $5 trillion lower today than it was at the 2007 peak — that is almost $60k per household or a 9% decline from where the average family was just a short five years ago...There is more of an air of permanency in the lost net worth, accentuated all the more by the demographic reality of a baby boomer class whose median age just hit 56 and saving for retirement no longer just something that can wait till next year...

Meanwhile the companies that do the hiring and pay the wages that are part and parcel of the consumer confidence surveys do not sound as nearly as positive as households do at the current time. Just as consumers say they haven't felt this good in seven months. the Business Roundtable CEO Survey (diffusion) index slipped for the second consecutive quarter to 66 in Q3 from 89.1 in Q2. the worst showing since the third quarter of 2009. Only 30% plan to boost capital spending in the next six months, down from 43% in Q2 and the smallest reading since Q3 2009 while 19% plan to reduce capex, up from 12% in Q2 and the highest share since Q3 2009. Moreover. only 29% of CEOs expected to increase employment, the fewest since Q1 2010 and 34% of them would cut jobs, up from 20% in Q2 and, once again, the most since Q3 2009...

No doubt, housing has rebounded. But it is now 2% of GDP and 11 million households are still upsideoown on their mortgage. The looming foreclosure inventory that has been held back is a future supply risk. The boomers are overhoused and will be looking to trade down but there is no market for a move-up buyer unless the first-time buyer moves off the sidelines but they are saddled with a near-9% jobless rate and poorjob prospects.

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