Saturday, October 15, 2011

USA Consumer Sentiment Continues at Recession Levels (Charts) "Recessionary downturn is likely to occur"


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Thomson Reuters/University of Michigan
USA Consumer Sentiment
 
Index of Consumer Sentiment, University of Michigan, Ann Arbor (October 14, 2011) Consumer sentiment unexpectedly slumped in early October as worries about declining incomes drove consumer expectations back down to the lowest level in more than 30 years, a survey released on Friday showed. The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment sagged to 57.5 from 59.4 the month before. It fell short of the median forecast of 60.2 among economists polled by Reuters.

Commenting on the Survey Surveys of Consumers Chief Economist, Richard Curtin: "Overall, the data indicate that a recessionary downturn is likely to occur," survey director Richard Curtin said in a statement. "Even if the economy manages to avoid the formal recession designation by (The National Bureau of Economic Research), real consumer expenditures will not be strong enough to enable the more robust job growth that is needed to offset the negative grip of economic stagnation on consumer behavior."

Trend The Index of Consumer Sentiment decreased -1.9 to 57.5 (preliminary) is the lowest since August 2011 (55.7) and also the 3-month average. The short-term, intermediate-term, and the long-term trends continue downwards.

Cycle History The current October 2011 Index of Consumer Sentiment is 57.5 (preliminary) and is just above the recent August 2011 low of 55.7. The Great Recession low was 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 Pre-Great Recession peak of 96.9 was reached in January 2007. In 2004 the index was greater than 100.

Consumer Sentiment Index by Month Below is a multi-year chart of the Reuters/University of Michigan Index of Consumer Sentiment by Month through the latest month reported.


Consumer Sentiment Index by Year Below is a multi-year chart of the Reuters/University of Michigan Index of Consumer Sentiment by Year adjusted 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 chart below smooths out these short-term ups and downs and provides an intermediate-term perspective by averaging the months in each year. The Pre-Great Recession peak was in 2007 at 85.6. The Great Recession low was 2008 at 63.8, which illustrates the sustained, lower sentiment. The Post-Great Recession peak has been 2010 at 71.8. The 2011 average of 67.1 is through the latest month reported.


Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 57.5 (preliminary) in October 2011 is above the recent August low of 55.7, which was the lowest since the Great Recession low of 55.3 in November 2008 and also at 1980 recession levels. Essentially the current reading is at recession level, gloomy sentiment. The index averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009. Not only the short-term trend is decreasing, but even the intermediate-term, long-term, and ultra long-term trends are decreasing.

Of note in October 2011, "Thirty-nine percent of consumers cited income declines as the reason why their finances have recently worsened, while 65 percent of all households expected no income increase during the year ahead. Both levels were the highest ever recorded by the survey."

The August 2011 Index of 55.7 was the lowest since November 2008 (55.3), a 2+ year low, and those were dismal days indeed. Now the October 2011 consumer sentiment has decreased and continues near these low levels. 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. In addition, Standard and Poor's downgraded the United States sovereign debt credit rating on August 5 from AAA to AA+. 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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