As Gas Prices Escalate, Worries About a Recession Turn Into Fears of Inflation
Jun 2nd, 2008 | By William Patalon III | Category: Oil Investment & Alternative Energy, Politics & EconomicsEconomically Speaking
If the consumer truly accounts for 2/3 of the growth of the economy, the latest confidence readings cannot be good news. The Conference Board reported that its confidence index fell for the 5th consecutive month to its lowest level in almost 16 years. Meanwhile, the competing U. of Michigan sentiment survey plummeted to a 28-year low. (So, whatever your index of choice…the consumer appears to be in hibernation.) Then again, what consumers SAY and what consumers DO are often two very different things.
Of note, orders for durable goods dropped by 0.5% in April; HOWEVER, once aircrafts and autos were factored out of the equation, sales of these high ticket items actually rose by 2.5% last month. In fact, orders for appliances and electrical equipment surged by over 25%, the best reading ever reported. Overall consumer spending also increased in April, though the naysayers quickly point out that much of the gains were reflective of higher prices as opposed to increased sales. (Bear in mind, any over-analysis of the data can lead to a variety of diverse and confusing conclusions about consumer activity…so pick your poison, but don’t read too much into any one number).
This past week also found the revision of the 1st quarter GDP which had initially been reported as growth of 0.6% during the January through March months. Again, the pessimists in the bunch claimed that recession already was in our midst, and (by true definition) two consecutive quarters of negative activity were closing in. Instead, the revised GDP reflected a 0.9% gain in the 1st quarter, a weak showing by any measure, but still positive and far from recessionary.
| Date | Release | Comments |
| May 26 | Memorial Day | Can any afford to travel? |
| May 27 | Consumer Confidence (05/08) | 5th straight decline and worst reading since Oct. 1992 |
| New Home Sales (04/08) | Increase still left sales at lowest level in 17 years | |
| May 28 | Durable Goods Orders (04/08) | Excluding transportation, best showing in 9 months |
| May 29 | GDP (1st Qtr) | Revision shows slightly stronger quarterly growth |
| Initial Jobless Claims (05/24/08) | More claims reveals softening labor market | |
| May 30 | Personal Income/Spending (04/08) | Increase in spending offset by rise in prices |
| The Week Ahead | ||
| June 2 | Construction Spending (04/08) | |
| ISM – Manu (05/08) | ||
| June 3 | Factory Orders (04/08) | |
| June 4 | ISM – Services (05/08) | |
| June 5 | Initial Jobless Claims (05/31/08) | |
| June 6 | Unemployment Rate (05/08) | |
| Nonfarm Payroll Additions (05/08) | ||
| Consumer Credit (04/08) |
Source: As Gas Prices Escalate, Worries About a Recession Turn Into Fears of Inflation
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William (Bill) Patalon III is the Managing Editor and Senior Research Analyst for Money Morning, and is also the Managing Editor for The Money Map Report. Patalon's work has appeared in Kiplinger's personal finance magazine, USA Today, and The South China Morning Post, among other publications.
