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Tomorrow’s News Today

Interviews March 1 to 10

Other Articles

The economy: News about the economy will, on balance, be slightly optimistic.

Consumer spending: News about retail sales will be more negative than has been the case over the past six weeks.

Equity prices and trading: Absent any major newsbreak, equity trading will remain light and continue to fluctuate with a slight upward bias in response to spot news of the day.

Politics: In March, preference for the Democratic Party jumps to 46% and preference for the Republican Party dropped to 31%, giving the Democratic Party a clear lead. In January, the two parties had been neck and neck in terms of public preference (39% leaning Democratic and 37% leaning Republican).

BACKGROUND NARRATIVE & STATISTICS

Consumer Balance Index (CBI)

CONSUMER BALANCE INDEX (CBI), which tracks consumer perception of their financial balance – income and assets versus debt and current spending rate - moves up two points from 82 in February to 84 in March. It now stands halfway between the September recession low of 73 and the October 2007 pre-recession high of 95.

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As the CBI Index advances, consumers’ outlook for the economy brightens, with the percent seeing things going worse for the economy dropping from 44% in February to 40% in March. And 42% of consumers in March expect the recession to be over within the coming two years – down from 44% in February.

The CBI’s upward move reflects a continued decline in the percent of consumers with the “Weakest” financial balances partially offset by a downtick in the percent with the “Strongest” balances.

Tomorrow’s News:News about the economy during the balance of March and early April will, on balance, be slightly optimistic.

Consumer Spending

Consumers are clamping restraints on spending in March. The percent of consumers reporting they are spending freely to sustain their standard of living declines from 53% in February to 47% in March.

The Index tracking spending for consumables – food, clothing, gasoline, medical services – declines from 78 in February to 73 in March. The index tracking active shopping for big ticket goods – that is, visiting dealers and checking prices on autos, housing and eight other big ticket items – drops from 102 in February to 93 in March.

The February to March decline in spending is related to consumers sensing that they have spent beyond their means in February.

Consumers monitor the sustainability of their rate of spending by the amount of money they have left unspent at the end of the month that is available for saving. The percent of consumers reporting they had money left over at the end of the month for savings declined from 42% in February to 36% in March,which signals to the consumer that they overspent in February.

Tomorrow’s News: In the coming six weeks or so, news about consumer spending will be more negative than it has been over the past six weeks.

Stock Prices

More consumers who hold stocks directly or in mutual funds say that the value of their investments has increased month to month (22%, up from 18% in February) than say they have decreased (8%, down from 13% in February).

Looking forward, consumer investors remain relatively passive but somewhat optimistic about future stock prices. The ratio of prospective buyers to prospective sellers stands at 1.20 buyers to each seller in March and in February, somewhat higher than the 0.96 buyers to sellers in January.

Tomorrow’s News: Absent any major newsbreak, the likelihood is that equity prices will fluctuate with a slight upward bias in response to spot news of the day.

Longer Term News

Projections of tomorrow’s news over the coming six weeks or so on the basis of month-to-month data are more realistic than longer-term forecasts, in that they are based on observations made during the first ten days of each month of events that are already in progress.

When the basic structure of the economy is stable, month-to-month data can be used to make fairly realistic persistence forecasts, based on trends which assume all factors remain the same.

Currently, however, the basic structure of the economy and the society it supports are highly unstable, making persistence forecasts unrealistic. Our March survey finds major segments of the public spontaneously describing the nation as beset with a number of major problems including:

Unemployment (49% mention)
The economy (27% mention)
Lack of leadership (24% mention)
Healthcare (24% mention)
War and foreign affairs (13% mention)

PLUS a host of problems mentioned spontaneously by fewer than 10% of the public but perennially in the news as interest groups sponsor legislative initiatives. These problems include: Global climate change, inflation, abortion, crime and violence, education, immigration, poverty, family disorganization, and homelessness.

Frustrated with the inability of federal government to resolve problems affecting their life, liberty, and pursuit of happiness, the public elected Barack Obama to office who promised “change.”

Drastic changes effected by government actions to solve the major problems facing the nation increases the uncertainty faced by those making personal and corporate decisions. Decision makers must not only confront uncertainty about the efficacy of their contemplated actions but must also handle the uncertainty that rises from not knowing what will be happening in the larger social and economic space when they do finally act.

The economy and the society it supports continue in the process of metamorphosis (rather than rehabilitation) that began during World War II. When production of goods and services begins to grow strongly and steadily, the economy and the society it supports will be different than they were in 2009 before the Great Recession began.

To anticipate longer term change, 8Sages.com will, in addition to reporting month-to-month change, also report on progress toward answering one of the three following questions:

Which political party will control the federal government?
What problems will the federal government elect to solve?
How will the federal government seek to solve these problems, and what effect will its actions have on the basic structure of the economy?

This month, the focus is on Question 1 – Which party will control the federal government?

During the months between June 2009 and January 2010, Obama’s approval rating dropped from 62% to 43%. In tandem, the percent leaning Democratic decreased by eleven points, from 49% to 38%. Simultaneously, the percent of the public reporting they leaned Republican increased by nine points from 28% in June to 37% in January.

In February 2010, the negative trend in public approval of Obama abruptly reversed. His approval rating jumped six points from 43% in January to 49% in February. Mirroring the change in Obama’s approval rating, the negative trend for the Democratic Party halted – ticking up a point from 38% to 39% – and the positive trend for the Republican Party also halted – ticking down a point from 37% to 36%.

By March, the preference for the Democratic Party had jumped to 46% and preference for the Republican Party dropped to 31% giving the Democratic Party a clear lead.

Between June and January, the Republican Party demonstrated its ability to gain support and was on its way to control the federal government. However, between January and March, the Democratic Party demonstrated its ability to blunt attacks by the Republican Party.

Looking ahead, the Democratic Party has retained its edge, but the outcome of its struggle to retain control remains uncertain.

TO ASK QUESTIONS, request detailed data, make suggestions or offer projections of the future, phone Leo J. Shapiro, CEO, SAGE: Survival and Growth Enterprises LLC. He can be reached in Tucson at 520-878-0188 or Chicago at 312-321-8114.