Boom Doom Economy: July 2011

Friday, July 29, 2011

USA Consumer Sentiment Plunges to Recession Levels (Charts) Bleak View: economic slowdown expected by consumers

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Thomson Reuters/University of Michigan: USA Consumer Sentiment

(University of Michigan, Ann Arbor, July 29, 2011) Consumer confidence tumbled in July to its lowest level since early 2009 when the economy was still in recession. Prospects for economic growth were much more negative, and the unemployment rate was expected to rise twice as frequently as decline. Personal financial expectations slipped as the majority of consumers anticipated no income increases. Although inflation expectations fell in July, just one-in-ten consumers anticipated inflation-adjusted income gains during the year ahead. As a result, consumers have been forced to reduce planned discretionary spending.

Commenting on the Survey Surveys of Consumers chief economist, Richard Curtin: “Consumers continued to view their finances in quite bleak terms both for the year ahead as well as over the next five years. More than twice as many households reported that their finances had worsened rather than improved during the past year, eight-in-ten anticipated no financial improvement during the year ahead, and six-in-ten expected no financial gains over the next five years. The absence of positive near and longer term financial expectations has turned consumer resilience into consumer fragility at the first signs of renewed adversity. The data indicate that spending will be barely higher in the second half than in the first half of 2011.”

Trend The short-term trend continues downwards with 2 consecutive monthly decreases in June and July of -2.8 and -7.8, respectively. The intermediate-term trend (6-month moving average) continues downwards and the long-term trend (12-month moving average) continues downwards.

Cycle History The current July 2011 Index of Consumer Sentiment is 63.7 (final). The reached a Post-Great Recession peak of 77.5 in February 2011, just before oil prices spiked up. A Great Recession cyclical and all-time low of 55.3 was set in November 2008. A Pre-Great Recession peak of 96.9 was reached in January 2007. In 2004 the index was greater than 100.

Consumer Sentiment Index (Chart) Below is a chart of the Reuters/University of Michigan Index of Consumer Sentiment from July 2010 through July 2011, the latest month reported.

Consumer Sentiment 6-Month Moving Average (Chart) Below is a chart of the Reuters/University of Michigan Index of Consumer Sentiment 6-Month Moving Average from July 2007 through July 2011, the latest month reported. The previous chart above, the Index of Consumer Sentiment, is rather like following the bouncing ball when charting human sentiment, confidence, mood, and outlook regarding the USA economy and their own individual prospects. Therefore, the 6-month moving average chart smooths out these short-term ups and downs and provides an intermediate-term perspective. The Pre-Great Recession peak was in May 2007 at 90.6 while the Great Recession low was in March 2009 at 58.0. The Post-Great Recession peak has been in June 2010 at 73.9. The 6-month moving average has dropped the past 2 months.

Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 63.7 (final) in July 2011 is a multi-year low and a "Lose Hope All Ye Who Enter" signal. Even the intermediate-term trend (6-month moving average is decreasing significantly). The July 2011 Index of 63.7 is the lowest since March 2009 (57.3) and those were dismal days indeed. Undoubtedly, not just high unemployment and high oil prices, but the bipartisan deadlock on the U.S. debt ceiling is having a tremendous negative impact. This bipartisan bickering also pushed down the Index in September and October 2010 before the mid-term Congressional elections, but not to this extent. USA consumer sentiment continues at historically low levels.

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USA Weekly Leading Index Increases Slightly (Charts) Annualized growth rate continues in December 2010 range

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ECRI Economic Weekly Leading Index and Annualized Growth Rate

*** Updated July 29, 2011 for the week ended July 22, 2011 ***

USA Weekly Leading Index

Overview The USA Economic Weekly Leading Index (WLI) rose +0.2 to a 2-week high of 127.6 (preliminary) for the week ended July 22, 2011. The Weekly Leading Index has decreased 7 of the past 11 weeks and was at a 29-week low 4 weeks ago.

Trend The short-term trend (13-week moving average) continues downwards. The intermediate-term trend (26-week moving average) is level. The long-term trend (52-week moving average) continues increasing slightly.

Cycle History The recent short-term peak was 131.9 for the week ended April 15, 2011. The Weekly Leading Index reached a Post-Great Recession peak of 134.9 for the week ended April 30, 2010. The recent short-term low was 126.2 for the week ended June 24, 2011. A Great Recession low of 105.4 was set for the week ended March 6, 2009.

Weekly Leading Index (Chart) Below is a chart of the ECRI Weekly Leading Index, from the low of 120.3 for the week ended July 9, 2010 through the latest week reported.

USA Annualized Growth Rate

Overview The WLI Annualized Growth Rate (AGR) was rose +0.4% to a 4-week high of +2.0% (preliminary) for the week ended July 22, 2011. The Annualized Growth Rate has decreased 12 of the past 14 weeks, including decreasing 11 consecutive weeks from April 22 through July 1. The AGR was at a 30-week low last week (revised).

Cycle History The recent short-term peak was +8.0% for the week ended April 15, 2011. The recent short-term low was last week at +1.6%. The Annualized Growth Rate reached a Post-Great Recession peak of +27.8% for the week ended October 9, 2009. A Great Recession low of -29.8% was set for the week ended December 5, 2008.

Annualized Growth Rate (Chart) Below is a chart of ECRI WLI Annualized Growth Rate from the low of -10.9% for the week ended July July 23, 2010 through the latest week reported. A negative growth % was reached in early June 2010, remained negative for 28 consecutive weeks, and now has been positive the past 32 weeks (since the week ended December 17, 2010).

Commentary The current Weekly Leading Index at 127.6 (preliminary) is above the 29-week low of 126.2 for week ending June 24, 2011 and below the 49-week high of 131.9 for the week ended April 15, 2011, which was the highest since the week ended May 7, 2010 (131.9). The Annualized Growth Rate decreased 11 consecutive weeks before leveling off and increasing the week of July 22. The current Annualized Growth Rate at +2.0% (preliminary) is a 4-week high, but still continues in the December 2010 range and is now well below the 48-week high of +8.0% for the week ended April 15, 2011, which was the highest since the week ended May 14, 2010 (+9.3%). Gains previously attained have eroded. The WLI has been below the benchmark 130.00 level for 14 consecutive weeks and the AGR is near the 0.00% benchmark. The Weekly Leading Index and Annualized Growth Rate overall continue at levels that indicate some economic growth even though the both the levels and trend are worrisome. Both indicate an ongoing slow expansion of the USA economy. Per the ECRI, the Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI and is a 4-week moving average.