Consumer confidence rises in August

From CNNMoney.com:

A key measure of consumer morale made a surprising turn higher in August, but Americans still feel jittery about the economy.

The Consumer Confidence Index rose to 53.5 in August, from July's upwardly revised level of 51.0, the Conference Board, a New York-based research group that compiles the index, said Tuesday.

The rise follows two months of losses and beats the drop to 50 that economists surveyed by Briefing.com were expecting. But the index is still painfully low, falling far below 90 -- a level that typically indicates a stable economy.

"Markets are broadly interpreting this as an improvement in the economy, but overall consumer confidence is still very, very bad," said Tim Quinlan, an economist with Wells Fargo. "We went from being severely depressed about the outlook, to just being depressed about the outlook."

While the uptick means consumers' short-term outlook for the economy has improved slightly, a weak job market continues to weigh on their attitudes, Lynn Franco, director of the Conference Board Consumer Research Center said in a statement.

Economic Outlook Is Cautious Even With Spending Up

From The Associated Press:

Factories are churning out more goods. Consumers are spending. Government aid is fueling construction activity. But stagnant pay and weak hiring will likely restrain the economic rebound in coming months.

That cautionary picture emerged from a series of economic reports Monday.

Consumers stepped up their spending in March by the largest amount in five months. Yet the increase was financed out of savings. Incomes rose only slightly.

Unless employers boost pay and ramp up hiring, economists say consumer spending will likely taper off and dampen the recovery.

The construction industry remains a concern, too. Industry spending rose 0.2 percent in March, the first increase in five months, Commerce said. But all the strength came from government activity — much of it related to temporary stimulus money that's expected to run out soon. By contrast, construction by the private sector fell to the lowest level in a decade.

One sector that's helping drive the recovery is manufacturing. Factory activity in April grew at the fastest pace in nearly six years, according to the Institute for Supply Management, representing purchasing executives. Its manufacturing index rose to 60.4 in April from 59.6 in March — the ninth straight month of growth. A level above 50 indicates expansion.

Auto Industry on Road to Recovery but Pace Slows

From MSNMoney.com:

The U.S. auto industry stayed on the road to recovery in April, but it eased up on the gas pedal a bit.

Ford Motor Co. saw last month's sales rise 25 percent from a year earlier, while General Motors Co. climbed 6.4 percent. Hyundai, Subaru and others also continued to see gains from last year.

All automakers report their U.S. sales on Monday, and together they're expected to outpace last April, when the industry was hurt by the economic downturn.

But the industry overall may not be able to maintain the pace of March, when big sales promotions led by Toyota Motor Corp. fueled higher sales. The Japanese automaker needed to lure buyers after suffering a series of safety recalls beginning last fall.

As buyers' expectations for even better deals grew, demand slowed from March and some automakers eased up on promotions.

Consumers Step Up Spending, Bolstering Growth

The U.S economy grew in the first quarter, as consumers finally started spending again. Since consumer spending accounts for about 70% of economic activity, increased spending always means a boost for the economy. According to this MSN Money.com article, the economy expanded at a 3.2 percent annual rate, the strongest sign yet of economic recovery.

While growth slowed from the fourth quarter's rapid 5.6 percent pace and was a touch weaker than economists expected, the details of the report from the Commerce Department on Friday were fairly upbeat.

Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, added nearly 2.6 percentage points to U.S. gross domestic product last quarter, the biggest contribution since the fourth quarter of 2006.

"Once you take a quick look under the hood you see some very positive signs there," said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. "This is just the latest piece of evidence to suggest that the recovery is sustainable."

Still, markets showed some disappointment. U.S. stock markets were lower, while prices for U.S. government debt edged up. The dollar was little changed.

The Humbling of Toyota

International automaker Toyota has been in the headlines for weeks because of the controversy surrounding their acceleration problems, which have led to an estimated 51 deaths in the country. Earlier today, I came across this article on Business Week explaining how the companies once rewarding frugality turned in to its worst enemy causing millions of recalls. Checkout a section of the interesting piece below, or find the full text at Business Week.com.

Toyota Motor has always been fanatical about frugality, and for many years that was good for both the company and its customers. This is a Japanese carmaker that routinely turned down the heat at its employee dormitories during working hours and labeled photocopy machines with the cost per copy to discourage overuse. Its engineers collaborated with suppliers to extract cost-savings without compromising quality. Yet by the middle of the last decade Toyota's virtue had become a vice.

So say current and former auto executives who are trying to grasp how Toyota, with its gold-plated reputation for engineering excellence, slipped up on such a scale, with 8 million cars recalled due to mechanical failures linked by U.S. regulators to 51 deaths. Before company officials knew that runaway acceleration was causing crashes, one of these executives says, a simple manufacturing process would sometimes ignite small fires in a component as a direct result of corner-cutting. It was just one early sign that the focus on cost reduction had gone too far.

Those production mishaps occurred in 2006, a year after company President Katsuaki Watanabe boasted about having squeezed more than $10 billion from global operating costs in the previous six years—this despite an impressive run of profit growth and global market share gains in the middle of the last decade. Then Toyota pushed even harder for more cuts. It asked suppliers to design parts for its Camry midsize sedan that were 10% cheaper and 10% lighter. The company's top U.S. executive, Jim Press, warned his bosses in Japan that vehicle quality was slipping, according to a slide presentation U.S. Senate investigators unearthed in their sudden-acceleration probe. But his warning had no apparent effect.

Slow Growth And High Unemployment For U.S. In 2010

According to a Reuters.com article citing a study from the UCLA Anderson Forecast group, U.S unemployment rates will remain high over the next year, as the economy recovers at a slower than expected pace.

"Specifically, we forecast that after growing at 2.8 percent in the most recent and current quarters, real GDP growth will settle into a 2 percent growth path for much of 2010 and be closer to 3 percent in 2011," the forecasting unit said in its report.

"With such sluggish growth, the unemployment rate will likely peak at 10.5 percent in the first quarter and remain at or above 10 percent for almost all of next year," the closely watched report added.

For many, the tough jobs market will obscure how the economy will be regaining its footing. "Things will be improving but it won't be obvious to people on Main Street," said David Shulman, a senior economist with the UCLA Anderson unit.

"People won't be spending aggressively and people will be worrying about their jobs," he said. "It'll be a long, slow healing process."

Shulman said his unit's outlook mirrors Federal Reserve Chairman Ben Bernanke's comments on Monday. Bernanke said the recovery remained fragile and unemployment may be high for some time, cooling talk of an early rise in interest rates fueled by a surprise fall in the jobless rate reported last week.

Check Out Line: Consumers spending again?

From Reuters.com:

Check Out home-related retailers Sears Holdings and Williams-Sonoma reporting better-than-expected quarterly results. Does this mean consumers are feathering their nests again?

Somewhat, according to Barclays analyst Michael Lasser, who said Williams-Sonoma’s results were “an indication that upper-income consumers are spending a bit more, which is not surprising given the rally in the stock market and the stabilization in the housing market.”

Williams-Sonoma, which also operates Pottery Barn and West Elm, has updated its styles and slashed prices on some items to woo shoppers, despite worries that the move might tarnish its image as a high-end retailer.

But it’s not only high-end chains showing signs of life. Kmart, the value-priced retailer that sells everything from appliances to clothing, posted its first increase in same-store sales since 2005, and only its second since 2001. The chain, which is owned by Sears, took back its shoe operations this year from Footstar, which had operated within Kmart stores.

Even Sears, which depends more heavily on the housing market due to its Craftsman tools and Kenmore appliances, posted its best performance since the fourth quarter of 2007, and outperformed competing home improvement chains like Home Depot and Lowe’s.

Consumer Confidence in the US Drops in June

Surprising new reports have emerged reporting that consumer confidence has dropped drastically in June of this year, adding more tension to an already shaky economic situation. For those of you not familiar with the term, check out the following definition from Wikipedia.

“Consumer confidence is the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. How confident people feel about stability of their incomes determines their spending activity and therefore serves as one of the key indicators for the overall shape of the economy. In essence, if consumer confidence is higher, consumers are making more purchases, boosting the economic expansion. On the other hand, if confidence is lower, consumers tend to save more than they spend, prompting the contraction of the economy."

According to a Yahoo Finance article, “the consumer confidence index fell to 49.3 in June from 54.8 in May,” while economist had predicted “healthier reading of 55.0 for the month.” Not surprisingly, the announcement has had a pretty decent impact on the U.S. stock market. Check out the following article explaining the affect on stocks courtesy of Reuters.

U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy.

A separate report on April house prices in major cities offered some encouraging signs that the worst of the housing slump may be over, but that was not enough to lift investors' spirits. Another crop of economic data showed business activity in New York City and the Midwest remained weak, while retail chains slogged through a rough June.

Billionaire investor George Soros added to the cautionary tone, saying that rising borrowing costs posed a threat to any eventual economic recovery.

"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said at a breakfast hosted by the Wall Street Journal.

Major stock market indexes fell after the Conference Board's consumer confidence index showed households felt gloomier about their current situation and less optimistic about what the coming months might bring.

Kevin Kruszenski, head of listed trading at Keybanc Capital Markets in Cleveland, said the confidence data "kind of took the wind out of things a little bit."