Partner Center Find a Broker

‘US consumer confidence jumps in April’ – Perceptions, perceptions and perceptions is all that this seems to be about. Just last week the results of the Conference Board index were interpreted to be not so hot, though an indirect reference was made to a likely inflexion point being reached in the recession. These issues were highlighted in my article last week. Though no such reference was made last week, this week the Conference Board is beating the drums about consumer confidence being at its best in the last three years. Has the Conference Board woken up suddenly to a new methodology of interpreting the same data? Unlikely! This seems to be plugged in, due to the economy not showing any major improvements and the onset of the swine flu, which is likely to have a negative impact on the economy. Policy makers, analysts and decision makers amongst others are attempting to pump up human psyche to ease the effect of recession. Not that there is anything wrong in this approach, its just that a currency trader needs to be aware of such practices and factor in the likely impact of such announcements.

In any case it is worthy to analyze the new stance taken by the Conference Board and understand its relevance in the current economic scenario. As per the latest stance taken by the Conference Board, consumer confidence in the US shot up in April as the Board’s consumer confidence index jumped to 39.2 from 26.9 in March. This was the largest gain in a single month in the last three years. On this development, the Conference Board stated that consumers believe that the economy is bottoming out of the recession phase. This reasoning of the Consumer Board seems to be questionable. One may ask if consumers are well equipped to make such a judgment! In fact, one may ask if this is really what the consumers are saying or is this just a twisted interpretation to make some positive remarks on the economy.

It may also be noted that six of the Conference Board indicators for the particular index were in the negative, while three were in the positive and one demonstrated no change. Please refer to the chart in my previous article to view the status of the indicators. When all of them are read together, it is hard to state that the recession may be starting to bottom out. It then appears that the Consumer Board’s new stance is just a smart public relations exercise at the behest of policy makers to pump some confidence into the economy.

Having reviewed that, it is also worthy to note that the down slide in home prices did stall to some extent as revealed by the latest S&P Case Shiller index. This index compiles data from 20 major US cities and according to the index, prices collapsed 18.6% in February compared to the same period a year ago. In relation, prices had be collapsing 19% on a year on year basis since 2007.

While, this does add to President Obama’s "glimmers of hope" in the economy statement, it may be a bit too early to start shedding tears of joy as the global economy is projected to shrink by 1.3% and the US economy by 2.8% this year as per the IMF. Real solid recovery, more than mere twisted statements, may just be still some time away.

Forex News
Forex Reviews
Forex Trading Journal