Today’s Rally

THE BE YOUR OWN ECONOMIST ® BLOG

The stock market is rallying today and CNN Money attributes (http://money.cnn.com/2008/06/05/markets/markets_newyork/index.htm?postversion=2008060513) part of the gain to strong may sales at Wal-Mart.

Yet May’s auto sales disappointed again. The Commerce Department reported 14.3 million at a seasonally adjusted annual rate. Here are the figures over the past year.

May……………………2007………………16.3
June…………………...2007………………15.6
July……………………2007……………….15.2
August………………...2007……………….16.2
September……………2007……………….16.2
October……………….2007………….……16.0
November…………….2007……………….16.1
December……………2007………………..16.2

January………………2008………………..15.3
February……………..2008………………..15.3
March………………...2008………………..15.0
April…………………..2008………………...14.4
May……………………2008………………..14.3

There’s been a turn for the worse lately.

In a June 1 article (http://www.nytimes.com/2008/06/01/business/01checks.html?scp=2&sq=Peter+S.+Goodman&st=nyt) entitled “Consumers Lean on Rebate Checks for Bills and Gas.” The New York Times’ Peter S. Goodman began:

“The federal government is showering households with tax rebates to spur spending and invigorate a troubled economy. But many Americans are so consumed with debt and the soaring price of gasoline that they are opting to save the money or use it to pay bills, according to surveys, sales data and interviews with people from Florida to California.”

On June 2, in The Wall Street Journal, Eleanor Laise began her “Pinched Consumers Scramble for Cash story (http://online.wsj.com/article/SB121236369683536435.html) with:

“After a long binge of borrowing, U.S. consumers face a credit crunch and a sagging economy. To sustain their living standards, many Americans are doing what comes naturally: scrambling to raise more cash.”

And then continued by saying:

“As consumers max out their credit lines and banks clamp down on lending, many older and middle-class Americans are resorting to pricey, often-risky alternatives to stay afloat. Some are depleting their retirement accounts, tapping 401(k)s for both loans and hardship withdrawals. Some new fast-cash options allow homeowners to squeeze equity from their houses -- without the burden of monthly payments. One new product offers a one-time payment. In exchange, the company shares in as much as 50% of any future gain or loss in the property's value, typically collecting proceeds when the house is sold.”

Is the stock market’s rally premature?

© 2008 Michael B. Lehmann