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Market Commentary: The Consumer

December 1, 2008 – 2:23 pm

  There was some good news in the retail numbers over black Friday weekend which showed sales up 7% over last year. That is total sales which means more money was spent this year than last probably because there was so much discounting going on. Many experts feel it will not last throughout the holiday season and expect less money being spent overall, but those same experts expected a bad Thanksgiving weekend retail sales report.  

We may indeed have poor numbers in retail sales this Christmas but with gasoline prices half of what they were a few months ago maybe consumers will rebound. Also, with mortgage rates falling refinancing will likely pick up and monthly mortgage payments will shrink putting more money back into the consumer’s pocket. That would be a longer term impact but it is positive. 

On the negative side manufacturing activity declined in November at a very rapid pace. The ISM index fell to 36.2% from 38.9% in October. Any reading under 50% indicates shrinkage in manufacturing and over 50% an expansion.  

The economy is still sinking and as I have said repeatedly, watch housing. This morning one of the builders got an upgrade from Citigroup as prices of homes have fallen so much that buyers are being attracted. That does not mean a turnaround has started, but it is one small step in a series of small steps in the right direction. 

Good Trading
Steve Peasley

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