Friday, August 12, 2011

USA Consumer Sentiment Plunges to Historic Low! (Charts) *Gloomy outlook lowest since May 1980*


Thomson Reuters/University of Michigan: USA Consumer Sentiment

(University of Michigan, Ann Arbor, August 12, 2011) Consumer sentiment dropped to its lowest point in more than three decades in early August, as fears of a stalled recovery gelled with despair over government policies, a survey released on Friday showed. The Thomson Reuters/University of Michigan's preliminary August reading on the overall index on consumer sentiment came in at 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. High unemployment, stagnant wages and the protracted debate over raising the U.S. government debt ceiling spooked consumers, polled before the downgrade of U.S. sovereign debt by Standard & Poor's a week ago. 

Commenting on the Survey Surveys of Consumers director, Richard Curtin: “Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government's role. This was more than the simple recognition that traditional monetary and fiscal policy measures were largely spent; it was the realization that the government was unable or unwilling to act."

Trend The short-term trend continues downwards with 3 consecutive monthly decreases in June, July, and August of -2.8, -7.8, and -8.8, 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 August 2011 Index of Consumer Sentiment is 54.9 (preliminary) and is lower than the Great Recession low of 55.3 in November 2008. Consumer sentiment reached a Post-Great Recession peak of 77.5 in February 2011, just before oil prices spiked up. February 2011 was also the peak of several other economic indicators for the USA. A Great Recession cyclical 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 through 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 through 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 3 months.

Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 54.9 (preliminary) in August 2011 is a 30+ year low, a "Lose Hope All Ye Who Enter" signal, and is gloomy. Even the intermediate-term, long-term, and ultra long-term trends are decreasing. The prior month July 2011 Index of 63.7 was the lowest since March 2009 (57.3), a 2+ year low, and those were dismal days indeed. Now the August 2011 consumer sentiment drops significantly lower. High unemployment, high oil prices, and stagnant wages pushed sentiment down, but the bipartisan deadlock on the U.S. debt ceiling had a devastating, negative impact. Amazingly, the poll was conducted before the Standard and Poor's downgrade of the United States sovereign debt credit rating on August 5, which probably would have pulled the sentiment even lower. 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 has continued at historically low levels since 2007.

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Data Courtesy of Reuters/University of Michigan

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