Consumer Confidence Finally Matches Their Actions
After yesterday’s retail sales report, it isn’t any wonder when Reuters reported this morning that “U.S. consumer sentiment wilted in early July to the weakest since March, when confidence in the financial sector and economy were at a low ebb.”
That was according to the poll they periodically conduct with the University of Michigan. Just like the economy typically lags any stock market recovery, consumer confidence apparently lags reality. Since their confidence levels have been rising since February, it appears that there’s a 4 to 5 month delay between the two factors, especially considering that the economy has only gone from bad to worse since then.
While economists were reportedly expecting some kind of a drop - from 70.8 to around a 70.5 reading, consumers startled everybody by actually looking at the facts instead of running off of pretty rhetoric put out by leading officials. Hence the reason why the final tally for the first few days of July fell all the way to 64.6 instead.
There were various brilliant comments made on the subject by various brilliant people. For example:
“People are unhappy with the employment situation and the increase in energy prices we saw this spring,” Gary Thayer, senior economist at Wells Fargo Advisors in St. Louis, Missouri speculated.
While I understand that Mr. Thayer was probably asked for a statement on the spot and responded accordingly, that answer easily falls into the “You Think?” category.
And another one for that same column can be found in the Reuters/University of Michigan Surveys of Consumers itself, which comments how “overextended finances and job and income uncertainty have made consumers much more saving minded.”
Despite the somewhat shaky grammar used and the statement’s blatant obviousness, that sums it up quite nicely. People are afraid, and while that’s never preferable, it’s nice to see them finally admitting the truth… even to themselves.
Friday, July 10, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research
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