Roller coasters are not always fun

We were all hoping the economy would continue to gain steam but with housing sales on a downward spiral, it seems consumers are having a hard time remaining optimistic. The National Association of Realtors (NAR)  reported earlier this week existing single family home sales in July, which account for the bulk of total existing home sales, plunged 27.1% from June and 25.6% from July 2009. And though the housing news seems dismal for some, Lawrence Yun, NAR chief economist seems to be trying a more optimistic stance. He said, "Given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs."

Still, this news will likely bring fears of an economic slowdown back into light among consumers and could have a more negative effect on consumer confidence. Consumer confidence had already dwindled in July, dipping to 50.4 (1985=100), from 54.3 in June according to the Conference Board's Consumer Confidence Index. The upcoming Conference Board report out August 31 will provide insight as to whether we are headed downhill on the economic roller coaster once again.

 

Further evidence of the up and down roller coaster syndrome, the Discover U.S. Spending Monitor showed consumers' spending intentions had held steady and even increased during the spring and early part of the summer. However, the Monitor had a sharp decline in July. Julie Loeger, senior vice president of brand and product management for Discover noted, "In the spring, more consumers felt the economy was improving and that correlated with an overall increase in discretionary spending intentions. Monitor data now suggests consumers' confidence is declining, and with that, so are their discretionary spending intentions."

 

On the bright side, consumers seem to be feeling better about personal finances. According to the Discover data, 49% of consumers expected to have money left over in July, the highest number since March 2009.

 

Alison Paul, vice chairman at Deloitte, said, "American households continue to be cautious about spending while economic growth continues to be uneven. At the same time, consumers economized over the past two years and likely have pent up demand for goods they have foregone."

 

As many have curtailed their spending on big ticket items, such as furniture, let's stay optimistic that consumers' pent up demand will lead them to spend some of their discretionary funds on our category in the coming weeks and months.

 

Stay positive.