Global Recession Chatter Falls & Spending Gains

“Of the countries we examined, Spain had the closest margin between discussions of the recession and recovery. In other words, there were only 26 percent more chats about the recession than the recovery”

“In the U.S., we found that recession discussions have dropped since hitting a peak in January. There appears to be a strong correlation between what consumers are saying in discussion groups and their subsequent actual purchase behavior.

“From the end of 2008 to March 2009, when recession discussions were highest, we found that sales actually declined by 2.3 percent. From mid-March to early June, as recession chats dropped, we found that sales actually showed a modest increase”

In all countries measured this month, consumers are saving more of their money – even Americans, who have had a low savings rate, are holding onto their cash as concerns about unemployment and financial security continue.

Additional highlights from this month’s NEC:

· U.S. consumers pulled back on shopping and how much they spent per trip. Meanwhile, the shift to value channels such as supercenters, club and dollar stores continued, as did the move to private label store brands.
· Spending increased in Brazil and England
· Spending declined in U.S. and Canada
· China, France, Germany, India, Italy and Spain showed no movement from the previous month.

There were two chart that spoke volumes (click both charts to enlarge):

On a global scale in almost every country the “chatter” for lack of a better word on recession seems to have had a rather large fall. What is not accompanying that is “recovery” talk. That leads us to chart two:

What is happening globally is that as the recession talks wanes, a cautious consumer is resuming spending in certain areas. This does give some credence for those who want the “unprescedented economic recession” talk from government officials squashed a bit. I understand being honest with the voters, BUT, I am not sure it is necessary to tell us hourly how if we do not “act now”, catastrophe is sure to follow. We get it, lighten up.

No, I am not blaming those who are using such talk for the recession but what I am saying is that those actions do not help the mood of the consumer. It causes them to act very rational, they just do not spend.

One interesting point here is the strength from China, India and Brazil. What is the possible investment for their growth assuming one does not want to invest in individual names on those markets (I don’t).

For those looking to invest in commodities like oil (USO), with US supplies falling, one should assume the growth in those nations will begin to extract any excess global supply of oil from the market, putting a bid under current prices.

Here are a couple videos that underscore the point.

Well, can’t we just produce more? Not really. Let’s look at rig counts (from Baker Hughes (BHI) as of July 9):

US Rig Count is down 12 from last week at 916; down 1,006 year over year. Canadian count is up 13 from last week at 178; down 236 year over year. US Offshore count is 37, down 5 from last week; down 30 year over year. Worldwide count for June 2009 was 1,987, up 4 from the 1,983 counted in May 2009 and down 1,282 from the 3,269 counted in June 2008.

Simply put, demand for oil will well outstrip supply for it when the worm turns. As demand falls these rigs are slowly removed from service. There is a considerable lag that occurs when demand resumes before they are put back into service as producers want to be sure the demand is real and not a short term aberration. If you believe a 2nd half recovery is in store for the US (or at least stabilization) then oil prices would seem to have no place to go but up. We have already seen US supply levels falling as production has been taken off and the economy’s slide has lessened. Any uptick in activity ought to cause a nice spike in oil (for investors).

Disclosure (“none” means no position):none