We had an active discussion in the last week regarding consumer opinion/sentiment and spending, the actual amounts they buy. Colleagues were surprised by my assertion that the relationship is not as well defined as many believe. Specifically, improvements in sentiment are essentially meaningless. They do not necessarily translate into changes in spending. The graph here shows the two.
Had a laugh with this in my department. My caption was, “And in further news, the search ended for the next actor to portray Pinnochio.”
Recently, the Economist had a special feature on economic growth. One of the consequences they pointed out related to growth was improved survival of endangered species. I do not think we need to verify that work at this time, though it got me thinking about the consequences of economic growth for economic policy.
It seems odd to think that we should now feel happier given that the responsibility for solving the immediate fiscal mess falls to the Senate. The House and the Senate Republicans have been at odds with each other publicly over the last several weeks. A significant part of the issue is the difference in electoral concerns for Senators when compared to the Representatives from the House. Larger electoral districts generally include more diverse sets of opinions and as a result the entirety of a state requires differing approaches from the House districts.
Reminder: I am not giving trading advice, just my interpretation.
Some of my students wondered why equity markets are not down more and at times look to potentially increase. Equity markets are an imperfect reflection of future economic prospects because there are company specific issues that could dominate national negatives.