Structural Spending

An interesting conclusion is emerging from the data; consumer optimism is rebounding but spending patterns remain on the defensive. Whereas the average spending rate was $61 a day, nearly half of what it was a year ago, confidence indicators are more positive than they are negative. Rather than see a structural shift in spending patterns, as most analysts do, its probably more likely that in the immediate aftermath of the recession, 3 or 4years, the consumer is going to remain on the defensive. Whilst its not been a general depression, we have skirted very close to one and therefore a significant period of time needs to be accounted for before the market and consumer is back to its boisterous self. At any rate its very good if the lesson of thriftiness remains long after this recession; it would conceivably allow more of the world’s poor to participate in the next economic uplift.
 
Again however despite the increased “buoyancy” in the markets we aren’t seeing a repair in credit; there is very little appetite for risk in cds in general.The structural damage is such that there very little 2 way flow despite positive economic indicators like the ZEW, albeit a very soft indicator. As of now with both growth and earnings on the downside there’s still fear in the market and upcoming PMI data, later on this week, is going to significantly highlight the direction the Eurozone economy will be taking.