So here is a summary, consumer confidence/sentiment has plummeted and is the toilet at a 30 year low.
According to survey data released by Thomson Reuters and the University of Michigan, the mood of the nation’s consumers in August was abysmal, raising concerns about any prospect of an economic turnaround.
“Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government’s role,” survey director Richard Curtin said in a statement.
More worrisome is that this data reflects consumer sentiment before the Standard & Poor’s downgrade of the U.S credit.
Shopping habits tend to correlate better with expectations. That’s probably because no matter what the present economy looks like, if a person feels hopeful about the future, he or she is more likely to be comfortable about spending more.
“People’s spending doesn’t always correspond with their mood,” said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut. “I doubt things are as weak as the sentiment readings suggest . . .”
The Thomson Reuters/ University of Michigan’s preliminary August reading on the overall index on consumer sentiment fell to 54.9, the lowest since May 1980, down from 63.7 in July. It was well below the median forecast of 63.0 among economists polled by Reuters.
For an economy that depends on consumer spending for about 70 per cent of its activity, a simple change in attitude can be the difference between a slowdown and a recession.
However, US retail sales in July posted the biggest gain since March, tempering fears of slipping back into recession. Consumer spending accounts for two-thirds of US economic activity, and the data indicates the third quarter was off to a decent start.
Excluding cars, sales rose 0.5 per cent, well above forecasts for a 0.2 per cent gain. The figures were bolstered by a 1.6 per cent jump in petrol station sales. Retail sales excluding cars, petrol and building materials rose 0.4 per cent.
The Michigan report said, “Consumers have shifted from being optimistic about the potential impact of monetary and fiscal policies to a sense of despair and pessimism about the role of the government.”
According to economists at J.P. Morgan, the government-policy index “has fallen a whopping 30.0 points over the last two months to an all-time of low 45.0.”
The JPM report also said the survey showed “the decline in August sentiment occurred very early in the month, and no further declines were reported since the downgrade of U.S. debt and turmoil in equity markets early this week.”
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