A preliminary report on consumer sentiment in July is expected to show that Americans remain gloomy as job worries offset any enthusiasm about the resumed stock market rally that has helped bolster retirement accounts.
A preliminary report on consumer sentiment in July is expected to show that Americans remain gloomy as job worries offset any enthusiasm about the resumed stock market rally that has helped bolster retirement accounts.
Economists surveyed by Thomson Reuters expect the Conference Board's Consumer Confidence index, due out today at 10 a.m. EDT, project a reading of 49 this month, practically unchanged from June's 49.3 and a long way from economic health.
Consumer sentiment — fueled in part by a stock market rally and some signs that the economy was stabilizing — had been on an upswing since March after reaching historic lows. But in June, mounting job losses and other economic realities caught up with consumers, pushing down the key barometer a little more than 5 points and causing the rally to fizzle a little.
Over the past two weeks, better-than-expected earnings reports from companies across almost every industry have reignited the rally.
The Dow Jones industrial average hit above 9,000 Thursday for the first time since early January, helped by news that existing home sales rose in June for the third straight month. That could help the preliminary consumer confidence results, whose cut-off date for responses was July 21. The index is compiled from a survey of 5,000 U.S. households.
But clearly, shoppers are looking past surging stock prices and remain nervous about their own financial security, which represents a big obstacle for major retailers who need them to be in the mood to buy.
Economists closely monitor confidence because consumer spending accounts for more than 70 percent of all economic activity. A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.
"The overall trend in confidence is that there is no confidence," said Mark Zandi, chief economist at Moody's Economy.com. "Things are not as bad as they were, but they are still pretty bad." He added that he expects job losses to continue through next spring.
The Labor Department reported earlier this month that the unemployment rate hit 9.5 percent, while job losses accelerated to 467,000 in June. Economists predict a loss of 340,000 jobs in July, and a 9.7 percent jobless rate when the government releases its report on Aug. 7.
Against this background, investors will be dissecting earnings reports from retailers, to be released in the next few weeks, that will shed more insight into the financial health of consumers.
