Consumer Confidence Can’t Help Stock Bulls

Signs of a pending economic recovery are doing little to help stocks stay in the black today. But they are trying to maintain some of the gains made earlier on a strong home sales report, as well as an encouraging durable goods report. Additionally, the fact that consumer confidence is higher than expected is sort of helping out as well. But for now, none of that is really enough.

The bears are threatening to take over on the stock market as they mull over the fact that even though things are improving, they are doing so only modestly, and there is still a long way to go. The consumer confidence number, though, may at least help buoy some businesses, even if the stock market doesn’t quite agree.

Consumer confidence and profits

Consumers account for about to 2/3 of economic activity. When consumers are confident, they tend to spend money. Which means businesses get an increase in income. When consumers are not confident, they worriedly hoard their cash, preferring to build up savings rather than spend money at businesses. With consumer confidence on the rise, there are some hopes that customers will return, bringing their money and providing an infusion of cash.

However, improvements to consumer confidence have been rather small, and the index used to measure consumer confidence is a long way from what one would consider “solid.” And consumer confidence is pretty flimsy as long as the housing market remains iffy and unemployment remains, well, somewhat discouraging.

But there are hopes gains by home sales and home prices in recent months, as well as a slow down in the rate that jobs are being lost, may eventually help boost consumer confidence levels to something that is a bit more sustainable.

Image source: Rev. Xanatos Satanicos Bombasticos (ClintJCL) via Flickr