Consumer Confidence or its Ability to Predict the Future...

Here is the statement from the state statistic agency :

"Consumer confidence in the economy weakened further in February.
The consumer confidence indicator stood at 10.1 in February, having been 13.1 in January and 16.8 twelve months ago.
Confidence in the economy was also weaker than the long-term average in February.
The consumer confidence indicator last received a lower value than this in April 2006, when it stood at 9.4. "

I would like to highlight this particular sentence from their statement:

"Consumers predicted in February that consumer prices would go up by 3.7 per cent over the next 12 months. The long-term predicted average inflation rate is 2.1 per cent."

You wonder if they interviewed consumers or economist ... I think the consumer I have been talking to are more talking about 10% increase in consumer prices i.e Food, rent, oil... this 3.7% remind me the Ford (US president) campaign to fight inflation with his slogan W.I.N : 'Whip Inflation Now' that terribly failed...

What about a boom doom gloom technical analysis? :


In fact we have 3 scenarios:

1- The consumer confidence recovers from that point. We are just witnessing a mild slowdown. The US doesn't fall into a recession and Asia fully decouple from the rest of the world. Europe continue its record breaking growth. Everything is great and birds are still singing...

2- The consumer confidence fall to level seen in 2001. The U.S fall into a recession in the first half of 2008 and slowly recover through 2008 and beginning of 2009. We are witnessing a V shape recovery. Europe is growing albeit at a slower pace. Asia with China and India are still seeing good growth. Everything is fine and birds are still around...

3- The consumer confidence is on free fall, going much lower than the 2001 mild recession. Housing doesn't support any more economic growth instead become a drag. U.S. can't avert a recession and the Fed is struggling to stabilize the economy. It will take 3 years to start seeing good or near potential growth, it's a L shape recovery. Asia recouple with the economical issues seen in the US and Europe. Everything need to get worse before it gets better, bird flu is hitting again...