With the signs of a US recession growing more numerous, unemployment rising and a financial crisis in full swing, it would seem unusual to see an improvement in consumer optimism. Nonetheless, a rise in the Conference Board's sentiment reading was measured through September. Indeed, the indicator rose to a 59.8 reading for its third consecutive improvement, bringing the gauge to its highest level of optimism in five months. Looking at the report's breakdown, it is clear that we should remain cautious going forward on the maintenance of this strong trend. Along the initial breakdown, the current condition and outlook figures were clearly split. The present situation reading dropped to a new low with the labor differential dropping (a net 20.6 percent of respondents expect fewer jobs) and perceived business conditions slumped. Countering this, expectations improved for a third month. In fact, the outlook for business conditions, employment and income all rose despite the deterioration in economic data. To further suggest this is a questionable reading, plans to buy autos, homes and major appliances all fell. If sentiment does not translate into spending, the US economy can still fall into recession. With signs like these still crossed, the dollar rally may be living on borrowed time.
