Consumer Sentiment At 5-Year High

Published by Filipe R. Costa on Mon, 15/10/2012 - 11:16
confident consumer

Daily Market Commentary for October 15: Investors continue to be concerned about global growth prospects and Eurozone developments. US economic data has been positive but it seems that is not enough to lead investors to buy equities. Consumer sentiment is now at a 5-year high, as reported last Friday.

Consumer sentiment is now at 83.1, up nearly five points from September, and reflecting not only a gain in the expectations component but also in the current conditions part. People is confident about future income, seeing an improvement in the job market. This information is really positive as it don’t even take into account the recent drops observed in the unemployment rate. With the observed drop in the unemployment rate and on initial jobless claims, the boost in sentiment may be significant for the next report. With such improvements the FED may ease a little on its QE3 plans.

It is soon to take any conclusions but the latest indicators point to some improvement in the US. Consumer sentiment and confidence data along with jobs market information are the most important indicators to tell us something on the future development of the economy. As long as the consumer is confident it will spend more and more, boosting GDP and creating a good sentiment on producers and business in general that will start hiring again. For now, there may be some short term volatility as the earnings season has already started and results expected aren’t exactly the best, so investors may take the opportunity to make changes on their portfolios. Downward pressure will be on the table for some time. Gold has been the most affected commodity. The latest trade data coming from China showed improvements and the risk of inflation is decreasing. The usual hedge against it is losing strength.