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   XPost: sci.energy, alt.politics.elections, alt.politics.democrats.d   
   XPost: soc.women   
   From: kinkysr@yahoo.com   
      
   OTHER REASON FOR 'OBAMA OPTIMISM'  include ...   
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   The stock market. The Standard & Poor’s 500-stock index is up more   
   than 10 percent since June 1, a few recent choppy days in the market   
   notwithstanding.   
      
   -----   
      
   "Consumers are optimistic, and businesses aren’t: Five reasons for the   
   divide"   
      
   By Neil Irwin   
   October 24,  2012   
      
      
      
   There has been a great divide in the economy in the past few months:   
   Consumers are spending more and reporting better job prospects and   
   greater confidence about the future; businesses are reporting a   
   pullback in growth and hiring plans, and projecting a gloomy tone from   
   the executive suite.   
      
   Eventually, business activity will pick up to fulfill that surging   
   demand for consumers, or households will pull back as their job   
   prospects and incomes wither. One or the other will determine how the   
   economy looks over the months ahead.   
      
   The divide was highlighted in Wednesday’s statement from the Federal   
   Reserve’s policy committee, which concluded a two-day meeting.   
   “Household spending has advanced a bit more quickly,” the committee   
   said in describing the economy in recent weeks, while “growth in   
   business fixed investment has slowed.”   
      
   But let’s back up. Why is this divide happening? What can account for   
   such drastically different impressions of what is going on between the   
   living room and the boardroom? There are five answers that seem most   
   plausible, though none is entirely satisfactory on its own.   
      
   Staring over the cliff   
      
      
   Corporate executives are deeply attuned to what might happen if   
   Congress and the White House cannot agree on taxes and spending by the   
   end of the year: dramatic and immediate tax increases and spending   
   cuts.   
      
   The CEO mindset on the fiscal cliff has been evident in a spate of   
   third-quarter earnings announcements in the past two weeks. Almost   
   uniformly, company executives discuss the looming threat to the   
   economy, usually offering only vague comments that it has been a drag   
   on their confidence and that they don’t know exactly what a resolution   
   would look like. It seems a safe bet that ordinary people are spending   
   less time sweating the sequester or panicking over the payroll   
   holiday.   
      
   Some companies have responded more concretely to the threat of   
   financial turbulence. General Electric has issued $7 billion in bonds,   
   essentially getting ahead of the curve by refinancing $5 billion that   
   matures in February and raising more cash on top of that.   
      
   “We issued it in October so we don’t have to worry about what happens   
   if the fiscal cliff is not resolved,” GE’s chief financial officer,   
   Keith Sherin, told the Financial Times. “If it’s choppy, we are   
   prepared.”   
      
   Looking overseas   
      
      
   Some of the gloomiest assessments of economic conditions have come   
   from companies that do extensive business overseas. By many accounts,   
   as troubled as the U.S. economy has been in recent months, it looks   
   better than many of its counterparts. The 1.5 percent or so growth the   
   United States seems to be experiencing is better than the recessionary   
   environment in Europe. And Chinese markets are growing well below the   
   breakneck pace companies had become accustomed to.   
      
   The weakness in Europe was underscored Wednesday with a report that   
   Germany’s powerhouse manufacturing sector is contracting. A survey of   
   purchasing managers by Markit Economics showed a surprising drop in an   
   index of business activity, to 45.7 this month (numbers below 50   
   indicate contraction). By contrast, the most recent survey of   
   purchasing managers at U.S. manufacturers, which uses the same scale,   
   came in at 51.5, showing expansion.   
      
   In China, the 7.4 percent third-quarter gross domestic product growth   
   rate the government reported last week would be the envy of any major   
   industrialized nation. But it was still the lowest there since early   
   2009, in the depths of the recession.   
      
   Executives of larger companies are acutely aware of economic   
   conditions in overseas markets, and those realities are surely   
   affecting their confidence and expectations. U.S. families might be   
   forced to come to grips with those overseas realities if they lead to   
   job cuts among exporters.   
      
   Housing is humming   
      
      
   The signs of progress in the housing sector are growing more   
   convincing with every data release. Home construction, prices and   
   sales activity are all generally up, if nowhere near back to   
   historically normal levels.   
      
   This might be an arena where ordinary people have their finger closer   
   to the pulse than executives, and it is making them more confident   
   about their personal financial health and the economy at large.   
      
   For people who owe more than their mortgages are worth, even small   
   gains in what they perceive is the value of their home — say, a house   
   down the street sells for a little more than expected — can shift   
   their perception of their net worth in a big way.   
      
   If the housing improvement sustains itself and accelerates, it could   
   be a source of strength for the U.S. economy that businesses aren’t   
   yet counting on.   
      
   It’s a gas, gas, gas   
      
      
   The price of gasoline plays an outsize role in Americans’ perceptions   
   of what is happening with the economy. It is a large expense, incurred   
   regularly, and its price has been wildly volatile in recent years.   
      
   For businesses, fuel prices are just one more variable and have to be   
   reflected in projections. Many companies even use futures markets to   
   hedge against changes in fuel prices. Not many ordinary commuters can   
   do the same.   
      
   The price has been dropping a bit in recent weeks, which could account   
   for some of the buoyant sense among consumers. The national average   
   for a gallon of unleaded gasoline reached a recent high of $3.871 on   
   Sept. 13. The price was down to $3.625 Tuesday, according to AAA.   
      
   But this explanation isn’t entirely satisfying. Analyzing the change   
   in prices against the change in the University of Michigan Consumer   
   Sentiment Index since the 1990s shows that gasoline prices explain   
   only 4 percent of the shift in overall consumer mood. And the drop in   
   the past month is slight enough to help explain only a much smaller   
   improvement in the sentiment index than that reported.   
      
   Stock market rising   
      
      
   A final, not-entirely-satisfying explanation for the divide is the   
   stock market. The Standard & Poor’s 500-stock index is up more than 10   
   percent since June 1, a few recent choppy days in the market   
   notwithstanding. The rise occurred despite weak economic prospects, as   
   the world’s central bankers deployed new tools to pump up growth.   
      
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)