Don't count on the surprise July drop in consumer confidence to foreshadow any marked deceleration in Americans' spending or the economy's growth rate. The Conference Board, a non-profit research group, reported Tuesday morning that its index of consumers' confidence in their finances and the economy fell for the first time since last fall. It slipped to 135.6 this month from a 30-year high of 139.0 in June.

Wall Street hadn't expected quite so sharp a drop-off, since the fundamentals of consumer comfort remained in power in July: plentiful jobs, decent interest rates and, until quite recently, solid stock market gains.

Economists usually look to the confidence report for confirmation of patterns evident in other data series; few attribute much predictive power to it. In short, economists don't think we're in for an imminent economic slowdown.

"It is the first decline in 1999, but the index holds at a very high level," says William Sullivan, senior economist at Morgan Stanley Dean Witter. "I would still characterize household spirits as being bright and upbeat."

Consumers' appraisal of their present situation actually rose in July. Only a big drop in the expectations index pulled the overall reading lower. Economists grant less credence to that reading, since it represents little more than a collective guess about the future.

Now, if the expectations component were to continue declining, then a retrenchment in spending might loom on the horizon. But that seems pretty unlikely.

"If it takes a huge dip -- I found it always has before recessions," says Peter Kretzmer, senior economist at Bank of America Securities. "If you got about a 20- to 25-point drop, that is worth taking a look at."

The expectations index slipped a solid 6.1 points in July to rest at 114.9 -- nothing to sneeze at, but far from proving a trend.

One great place to find Americans' economic outlook is buried in the Conference Board press release and often is ignored by the financial media. The "plans to buy" section shows that the percentage of Americans planning major purchases rose in all three categories during July.

PERCENTAGE PLANNING TO BUY... Item July June May April Automobile 10.0 8.3 10.1 9.0 Home 4.0 3.9 4.0 4.2 Major Appliance 30.7 28.4 32.1 32.4

Consumer spending powers economic growth, contributing more than two-thirds of gross domestic product. In the first quarter, spending accelerated at an unsustainably brisk 6.7-percent pace as America feasted on cheap foreign imports and took advantage of low interest rates at home.

Spending growth looks certain to slow in the second half of the year. We'll get a first reading on the second quarter this Thursday, when the Commerce Department reports GDP. Wall Street expects a spending growth rate somewhere near 4 percent.

Of course, Kretzmer notes, the economy hardly ever slows on cue these days.

"This expansion has a way of, every time it seems to be slowing, bursting forward," he says. ( end snip )

Catch the last line........This expansion is gonna last forever! Whoopee.....................

-- kevin (innxxs@yahoo.com), July 27, 1999

Answers

Kevin,

WHOOO HOOO!!!! Ride that wave of confidence! : )

"the economy hardly ever slows on cue these days."

I wonder how fast the ride down will be? A feather? A brick? A meteor?

I can hear Kretzner now, "uh...wuh...buh...it tanked? Is that possible? But, I thought this was suppose to last forever."

Seems like, even without Y2k really affecting things, we're starting to slow down.

Mike

===================================================================

-- Michael Taylor (mtdesign3@aol.com), July 27, 1999.

From Computer Reseller News:

Spend ing Uncertainty Ahead: Strong Economy Meets Y2K

The writer says that the US is on good shape for Y2K and that there shouldn't be any impacts from US domestic failures. But...

Looking overseas, however, the Latin American economic situation remains a wild card.

Venezuela is in a deep recession, and Ecuador is trying to deal with serious financial problems. More importantly, two of the biggest Latin American countries-Argentina and Brazil-are showing signs of renewed economic stress, with Argentina's economy likely to contract at least 3 percent this year.

Officials for Argentina and Brazil have managed to keep the situation under control so far, but should a full-blown financial and economic crisis break out, it would send a lightning bolt through global financial markets, similar to reaction to the Asian crisis last year.

The harshest effects on the global economy of a Latin American economic crisis would be mitigated through the actions of relief agencies such as the International Monetary Fund.

But a scenario such as this would only increase business uncertainty about economic conditions at a time when the year 2000 changeover will be on every IT executive's mind.

This runs contrary to one of the cardinal rules of economics, which suggests that to keep an economy humming, keep the level of business uncertainty low. Business leaders could react to a new Latin American crisis by holding back on capital spending, including IT products and services, until the near-term outlook becomes clearer...

The article then goes on to say that this will only be a blip and that the global economic engine will keep humming along nicely. We shall see.

-- Mac (sneak@lurk.hid), July 27, 1999.