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Tuesday, June 28, 2011

Frown

Economic Confidence Index by Week, 2010 and 2011
Implications

The worsening of Gallup's economic confidence measure during June may be due in part to the dissipation of the "halo effect" surrounding the death of bin Laden. Confidence has now moved back near the April 2011 low. This suggests that the consumer benefits associated with steadily declining gas prices at the pump -- down 14 cents per gallon in the past two weeks -- are being offset by other factors. One such factor might just be that gas prices remain 82 cents per gallon higher than they were a year ago. Another could be the continuing dismal jobs situation.

Federal Reserve Board Chairman Ben Bernanke last week seemed to add to the growing economic pessimism, noting that the Fed has reduced its 2011 growth forecast for the U.S. economy. Wall Street continues to suffer as a result of the Fed's apparent confirmation of the economic "soft patch" and the financial problems in Europe. The battle over raising the debt ceiling has not disrupted the money markets to this point, but certainly represents another negative for overall economic confidence.

It may be that declining gas prices will eventually lead to improved consumer confidence and increased consumer spending, which could make the current economic soft patch modest and transitory. At this point, however, Gallup's monitoring of economic confidence does not support that idea.


http://www.gallup.com/poll/148277/Economic-Confidence-Remains-Near-2011-Low-June.aspx

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