CONSUMER CONFIDENCE
A residue of wariness
Although some are describing it as nearly the best of all possible worlds, many Americans harbor a hunch that the economic recovery remains fragile.
Job growth, while real, has been a mite disappointing, A flood of imports from overseas is undermining the willingness of American companies to add workers.
The puny job market has been a drag on consumer confidence. Which brings us to Tuesday’s February survey of Americans’ attitudes from the Conference Board. Economist Lynn Reaser is looking for a dip, to about 103 from 103.4 last month.
“Confidence rebounded significantly around the end of the year. It jumped above 100, perhaps from a feeling of relief among households that the elections were over,” said Reaser, of Banc of America Capital Management in St. Louis.
She said attitudes have brightened because the job situation is getting stronger in just about every region and state. Exports are growing. And Americans are able to handle their debt burdens, as they witness soaring home values.
“Consumers are hardly euphoric, but looking ahead, they will keep the economy expanding for a fourth straight year,” Reaser said. “They are eager to keep on spending at a rate greater than what the confidence surveys might indicate.”
INFLATION WATCH
Everyday prices edge up
Federal Reserve Chairman Alan Greenspan minced no words last week in telling members of Congress that the central bank will continue to boost interest rates to keep inflation at bay. Since late June, the Fed’s short-term barometer has been ratcheted upward a half-dozen times, to 2.5 percent.
No sooner had the Fed chief departed Capitol Hill than a fresh report on inflation showed wholesale prices leaping 0.8 percent last month, when food and energy are excluded.
Another look at cost pressures comes Wednesday, with the January consumer price index. Chicago economist Robert Dederick is looking for a gain of 0.2 percent, or 0.3 percent when food and energy are excluded.
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“The carmakers reduced incentives last month and there was a jump in prices for alcohol and tobacco,” said Dederick, of RGD Economics. “But in general, inflation appears to remain well in check.”
He said the Fed expects full-year consumer prices to rise this year by only about 2 percent, “because there still is excess capacity in production lines and in the labor market.”
On Friday, analysts expect fourth-quarter gross domestic product to be revised upward from the 3.1 percent estimate a month ago. Credit slightly stronger figures for inventories and goods sent overseas.
EQUITIES
Profit growth to slow
The stock market has just about finished assessing fourth-quarter corporate profits, amid forecasts that their rate of growth will fall by just about half in the months ahead. While Wall Street is accepting the subdued outlook gingerly, skeptics say it won’t take much to push stocks over the edge.
One of them is Bannockburn-based mutual fund manager Henry Van der Eb of the Gabelli Mathers Fund. He is telling clients that “the Fed’s artificially low short-term interest rates have flooded the system with excess liquidity. It has generated a series of asset bubbles, including stocks, housing and commodities, which will deflate.”
Van der Eb says it’s possible that the next Fed rate increase “will be the needle that accidentally pops the housing price bubble.”
Meanwhile, stock, bond, commodities, futures and options market will be closed Monday for Presidents’ Day. The weekly auction of short-term government debt will take place Tuesday.