Friday, December 09, 2005

Consumer Confidence Improves Again, Wholesale Inventory-to-Sales Ratio at Historic Low

- Preliminary Univ. of Mich. Consumer Confidence for December rose to 88.7 versus estimates of 85.0 and a reading of 81.6 in November.
- Wholesale Inventories for October rose .2% versus estimates of a .5% gain and a .6% increase in September.
BOTTOM LINE: US consumers grew more confident for a second month in December as lower gasoline prices left households with more money to spend during the holiday season. The avg. price gas fell to $2.19 last week from $3.12 right after the hurricanes hit. Moreover, hiring has rebounded back close to pre-hurricane levels and US economic growth has risen 3% or more for 10 straight quarters, the best streak since 1986. The current conditions component of the index, which is a gauge of whether or not consumers feel it is a good time to purchase big-ticket items, rose to 106.6 from 100.2 the prior month. I expect confidence to continue to improve as irrational pessimism lifts, energy prices fall and the US economy remains strong.

Sales at US wholesalers rose 1.2% in October, exceeding a gain in inventories that suggests increased production in coming months as companies try to meet demand, Bloomberg said. The inventory-to-sales ration fell to a historic low of 1.13 months versus a reading of 1.15 months in September. As companies continue to gain confidence in US economic resiliency, inventory rebuilding should help boost economic growth going forward.

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