In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second update discusses consumer confidence.

  • Consumers felt slightly less confident about the economy in September compared to recent months.  But broadly speaking, consumers are in a much better mood this year compared to the past 5 years.
  • The September gauge of 79.7 is still well under 100 – historical normal and the point where more than half of America would say things are moving in the right direction.  It is this sub-100 reading that leads many to think that we are still in a recession even though the economy has been growing the past 3 years with nearly 7 million net new job creations.
  • Consumer confidence needs to rise to America into a virtuous self-feeding circle:
    • higher confidence leads to more spending
    • more spending leads to more jobs
    • more jobs leads to even higher confidence
    • Cycle repeats
  • Confidence and optimism, at times, can be lifted by great leaders and is the cheapest stimulus to economic activity.  FDR’s effort to turn the country around with “You have nothing to fear but fear itself,” and Ronald Reagan’s “It’s morning again in America” were effective in lifting country’s mood and thereby automatically inducing people and companies to spend more.  These quotes did not cost a single penny of taxpayers’ money.
  • There is a large amount of cash on the sidelines.  Business spending in relation to company profits is very sub-par at the moment.  Historically, total business spending should be measurably higher than profits since many small start-up companies are borrowing to spend and expand (i.e., the blue line in the chart below should be much higher than the red bar charts).  That is not happening right now.
  • It is unclear what Angela Merkel, the newly re-elected German leader, had said to the country in boosting its economy.  Germany was one major holdout in not implementing a stimulus measure after the financial crisis of several years ago.  As a result, it does not have a budget deficit.  Yet, Germany’s economy grew and grew, from the evident boost to German confidence, thereby driving the unemployment rate to very low levels.
  • The only significant European leaders of the past 50 years that come to mind are two ladies: Margaret Thatcher of Britain and Angela Merkel of Germany.  It’s been the Maggie and Angie show, if you will, in the otherwise diminished European power over the past half century.  They also set a good example of a woman’s ability to be a fine powerful leader.  Is America ready?  Hilary Clinton will be speaking at NAR’s annual convention in November.  She is popular and also divisive as have been other past speakers at NAR events such as George Bush and Condoleezza Rice.  Will Hilary come out and say something that will excite and get the support of REALTORS®, such as when Ronald Reagan told the crowd “never mess with mortgage interest deduction?”  REALTORS® will wait and see.

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