Bob Pisani is off; this post was written by CNBC producer Robert Hum.
A very disappointing consumer confidence report weighed on stocks this morning. The Conference Board revealed its consumer confidence index hit a 10-month low, falling to 46 in February — much lower than the 55 level economists had been expecting. Additionally, consumers’ 6-month outlook on business and employment conditions worsened.
Weaker consumer confidence doesn’t bode well for retailers, which are still struggling to improve sales at their stores. How much consumers spend in the year ahead is critical in the economic rebound, since consumer spending makes up about 70 percent of the nation’s GDP.
However, a near-term rise in spending is likely overly optimistic:
a) In its consumer confidence report, the Conference Board warned that the “combination of earnings and job anxieties is likely to continue to curb (consumer) spending.”
b) That view is also being reaffirmed at the retail level. Speaking at an event, BJ’s Wholesale CEO cautioned that “discretionary spending is under pressure.”
Additionally, the reluctance to spend heavily was evident from this morning’s retail earnings. Many retailers still reported fairly tepid same-store sales:
Target up 0.6 percent
Macy’s down 0.8 percent
Home Depot down 1.1 percent
Office Depot down 4 percent
Barnes & Noble down 5.5 percent
One piece of good news for retailers: inventories and costs continue to be managed better, leading to improved margins and profits in the past quarter. But that can only prop up earnings so much. Ultimately, retailers must see stronger top line growth if their bottom lines are going to continue to improve…but that will only come as consumer confidence strengthens and greater spending returns.
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