Consumer Confidence Continues To Weaken
In keeping with the tradition of ups and downs, the economy showed a little dip today after some promising signs early in the week. Oil prices, after having fallen nearly $8 per barrel over the past month jumped up $5 per barrel today closing out at $106.
Sadly, American consumers are more skeptical about the economy right now than at any other point since even before the U.S. invasion of Iraq as indicated by the combination of slumping housing prices and soaring fuel costs. Theses extremes are unfortunately the worst they’ve been in five years.
We often talk about what this means in practical terms. In it’s simplest form we have to keep in mind that the economy is spending driven. Weakening consumer confidence in the economy most always foreshadows weakening consumer spending. Once spending slows, an already faltering economy can tumble into a full-blown recession.
On Tuesday the Fed said it had received bids of nearly $89 billion for $50 billion in short-term loans offered in its latest auction to banks. Here’s an eye-opener, thus far the Fed has made $260 billion in such loans since December to help take some of the pressure off tightening credit conditions.
All of this comes as news of stocks tumbling today after a drop in February’s durable goods orders injected the market with more pessimism about the economy. Sales of new homes fell as well in February (for the fourth straight month), which represents a 13-year low. While the rate of decline has slowed, the worst slump in more than two decades has not runs its course, analysts said.
About the only good news is that if the economic up and downs we’ve witnessed of late hold steady, perhaps the week will end closer to how it began.
