Dollar Moves Higher Despite Plummeting Consumer Spending
Nov 3rd, 2008 | By Doug Casey | Category: Financial NewsIn the currency market, the dollar was sharply higher against the euro. Late Friday, the euro was trading at $1.2751 vs. $1.2932 on Thursday.
“Flows and technical factors are driving” the dollar, wrote currency strategists at Brown Brothers Harriman. “Demand for the dollar has been much stronger in Asia and Europe than in the U.S. in recent sessions. That may reflect the fact that fewer U.S. investment funds hedge equities than do Asian and European funds.”
And, as the stock market closes its worst month since October of 1987, many are still taking refuge in the buck.
The day’s numbers were grim, beginning with the Commerce Department reporting the biggest drop in consumer spending in four years. Spending fell 0.3% in September after being flat since June. Year over year, spending was down 0.4%, the first such decline since the recession of 1991.
In addition, the University of Michigan/Reuters consumer sentiment index dropped a record amount in October, plunging to 57.6 from 70.3 in September. The index projected that the holiday spending season will be the “bleakest” since 1980.
“The U.S. consumer is in major trouble, with wage and salary income growth evaporating, credit extremely tight or unavailable, home prices continuing to decline, household balance sheets stressed, and food and energy costs consuming a large share of budgets. A consumer-led recession is upon us, and it promises to be a serious one,” wrote Josh Shapiro, chief economist at MFR.
Finally, the Chicago Purchasing Managers reported the Chicago Business Barometer plummeted to 37.8 in October, its lowest level since May 2001.
Source: Dollar moves higher despite plummeting consumer spending – Sentiment index also plunges.
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