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Confidence game

January 29, 2013 - Rob Weaver
I've often thought the real difference between being confident and being over confident is whether one wins or loses.

This month, consumers lost money. As a consequence, they lost confidence.

Don't take my word for it. Tuesday morning at Heidelberg University, a certified financial adviser relayed that information during the annual economic forecast breakfast sponsored by Seneca Regional Chamber of Commerce. This edition was co-sponsored by Croghan Colonial Bank.

Charles Simko, senior portfolio manager for MainStreet Advisors, said while retail sales rebounded in 2012, consumer confidence still suffered.

“People don't feel good about the economy yet,” Simko said. “Consumers do spend; they have to. They just don't feel good about it yet.”

Part of the problem is that lower prices at the gas pump have been offset by the end of a break on payroll taxes for Social Security. This was echoed later Tuesday by The Conference Board, which said its consumer confidence index fell 8.1 points from December to January, dropping to 58.6 -- it the lowest reading in more than a year and the third straight decrease. The main reason: The increase in Social Security taxes Jan. 1 leaves workers with less take-home pay.

More recently, gas prices have put more of a squeeze on those paychecks. The Associated Press reported the average price at the pump rose for a 12th straight day Tuesday to $3.36 a gallon. Meanwhile, wholesale gasoline prices have risen over the past week, so motorists can expect to pay even more -- or get even less -- at the gas station.

Trouble is, consumers may not be able to win for, well, winning. Growing economies -- if not here, then abroad -- are likely to cause oil and gas prices to continue rising. But with joblessness still high, don't expect wages rise as well.

“Perhaps more important than the shock to confidence, the hit to income is also likely to show up in a slower pace of consumer spending in the first half of this year,” Thomas Feltmate, an economist at TD Economics, stated in a note to clients.

Of course, consumers could feel optimistic again if members of Congress reach a meaningful deal to reduce deficit spending. The question is, do you feel confident or overconfident? Or do you have any confidence in that happening?


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