Consumer Confidence Rises Slightly, Weekly Retail Sales Still Near Average Rates

- Consumer Confidence for July rose to 51.9 versus estimates of 50.1 and 51.0 in June.

BOTTOM LINE: Consumer Confidence in July exceeded estimates and rose slightly from June, Bloomberg reported. The proportion of people expecting their incomes to rise over the next six months rose to 14.2% from 13.1% in June. The Present Conditions component of the index fell slightly to 65.3 from 65.4 in June. The Expectations component rose to 43.0 from 41.4 in June. The percentage of Americans planning to purchase a house rose to 2.7% from 2.4% in June. The percentage of those that see business as good rose to 13.1% from 11.5% in June. The percentage of those that see business as worse 6 months from now fell to 32.4% from 33.5% in June. The New England region, while still depressed, saw consumer confidence jump significantly to 47.8 from 26.6 the prior month. The Southwest Central and Mountain regions remain the most optimistic at 81.6 and 72.2, respectively. For the third week in a row, weekly retail sales rose +2.7%, which is the best showing since the week of September 11, 2007 and just slightly below the long-term average, despite numerous headwinds and the diminishing effects of the government stimulus package. Weekly retail sales have now averaged +2.68% over the last month, up from an average weekly gain of .6% during the month of February. The US Dollar Index is surging .84% and the 10-year yield is rising 8 basis points on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is falling to 2.31% today, which is down 32 basis points in 16 days on the decline in commodity prices. The commodity bubble has been the driving force behind the current "US negativity bubble." I expect consumer confidence to improve and retail sales to move back above average levels into year-end as energy prices fall meaningfully, the US dollar rallies, election uncertainty ends, stocks rise, inflation decelerates significantly, housing fears subside, interest rates remain relatively low and the job market improves modestly.