Ian Shepherdson Cons Quotations

Now the question is whether sales can hold up in the face of lower consumer confidence,

We are not forecasting a recession, but there is some truth to the notion that negative news can be a self-fulfilling prophesy. If companies expect demand to slacken, they scale back production. And if consumers expect doom and gloom, they scale back spending. That's just the way it works.

Unfortunately, at current levels, and coupled with the extraordinarily low level of labor demand, the claims numbers are still consistent with flat or falling payrolls and a rising unemployment rate. There's no real relief in sight here yet.

Strength is broad-based, confirming that what consumers do can be very different to their responses to confidence surveys.

This report is stronger than it looks and is consistent with the industrial recovery gathering pace,

With unemployment set to breach 6 percent over the next few months, people's view of the current economy is bound to deteriorate, ... But expectations are what matter for spending, and at this level the numbers suggest consumers spending will rise, albeit not rapidly.

Given the huge decline in consumer confidence, this (gain in spending) does not seem unreasonably weak, especially with consumers' real after-tax income growth slowing too.

Expectations are a leading indicator and are consistent with modest spending gains. Stronger stocks will push the index up further, and soon. This is a good report.

At 296,000, claims have slipped back to a five-week low, ... This is simply too low a level to be consistent with a major change in the labor market.

At this level the index is consistent with spending growth of about 3.5 percent, in line with recent economic data. But watch out for a dip next month in the wake of the renewed spike in gas prices. Overall, though, quite robust.

While claims at 350,000 or so would not be a disaster, they would be consistent with (monthly) payrolls trending at only about 125,000 -- not enough to push the unemployment rate any lower.

Ignore the ISM at your peril, ... Assuming this report is not a fluke - everything we look at suggests it is very real - it is consistent with year-over-year GDP growth accelerating to 4 percent by the summer.

The Fed's chief worry is still the labor market. So long as the unemployment rate does not fall further, and clear signs of consumer slowed own emerge, the Fed will be able to leave rates on hold.

The Fed's chief worry is still the labor market, ... So long as the unemployment rate does not fall further, and clear signs of consumer slowed own emerge, the Fed will be able to leave rates on hold.

People told consumer surveys they were miserable, but they were willing to borrow money to pursue a bargain,

We fully expect sentiment to drop sharply, putting in place the conditions for much softer consumer spending numbers.

We remain of the view that the Fed's near-term objective is simply to support the stock market until consumer and business sentiment improves,

It is just too soon to be sure that the second-quarter slowdown will be sustained, ... The level of consumer confidence is still consistent with 5 percent spending growth.

If real spending rises at this pace in February and March, consumer spending will rise just 2.3 percent for the quarter, the softest since Q2 1997,

One steep drop in housing starts does not make a downward trend, especially in a month which was very wet in the West and very cold in the Northeast. Still, the data are consistent with other signs of a softening housing market, most notably the drop in homebuilders' confidence. What really matters, though, is whether sales will fall fast enough to turn a softening into a collapse.

Looking forward, we think there is next to no chance these numbers mark the start of a real slowing in consumer spending. The markets will no doubt take comfort from the headlines, but it is temporary relief.

This level of the ISM is not consistent with recession,

The January revision is mostly due to the plunge in aircraft orders reported in the durable-goods numbers. In February, the index was pulled down by lower consumer confidence, higher jobless claims, shorter delivery times and lower building permits.

Clearly, these headlines will assuage some of the fears of a consumer collapse, and they mean the Fed will wait till the meeting before easing again. We still look for at least a 25-basis-point easing on Jan. 31.

We expect a couple of very rough months for consumers spending.