Consumer Confidence Back Down in July
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As I’ve been saying repeatedly, talks of ‘green shoots’ are premature, and sentiment is about to deteriorate. Today’s preliminary estimates of consumer sentiment in July bear this out. From Reuters:
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, the Reuters/University of Michigan Surveys of Consumers showed on Friday.Consumers’ rising concerns about a protracted economic downturn, job security and erosion of wealth were the main factors depressing sentiment, the survey said.
Its preliminary index of confidence for July fell to a reading of 64.6 from the final reading for June of 70.8.
The University of Michigan Consumer Sentiment Index is primarily a measure of: (1) consumers’ short-term and long-term view of economic prospects, and (2) consumers’ view of their own financial situation. It is considered a leading indicator, which is why pundits on CNBC blindly celebrate any minor upturn in this index.
The article continues:
“Consumers reported a larger negative shift in their longer term outlook for the economy. The majority of consumers thought that widespread unemployment would persist over the next five years,” the Reuters/University of Michigan Surveys of Consumers statement said.
Consumers are right. The unemployment picture isn’t changing anytime soon. I maintain my target of 15% in U-3 unemployment by the time this is all said and done. This is a secular Depression according to all the data.
Now lets take a look at the cheerleading from last month’s Michigan Consumer Confidence number. From Bloomberg on June 12th:
Confidence among U.S. consumers rose this month for a fourth straight time, reflecting signs that the worst recession in at least five decades may end this year.“Confidence is slowly but surely coming back,” James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “In the next few months we should see more follow-through in the labor market, which in turn should give confidence a further boost, which in turn should lead to a sustained recovery in consumer spending.”
As you can see, expert projections and mainstream views are often very, very wrong. People have short-term memories though and continue to listen to faulty “expert” advice.
History proves that even the most dramatic economic downturns don’t go straight down. There will be short-term bounces in economic data that will give off the impression of recovery to the uninformed. The key is not to be fooled by bounces, whether it be in the stock market or in economic data. I continue to assert that gold is your only real insurance against a system that continues to threaten to collapse.
More on this topic
(What's this?)
Markets Slide on Consumer Confidence, Unemployment Reports
(Money Morning, 6/30/09)
Consumer confidence fades
(The Mess That Greenspan Made, 7/10/09)
Consumer confidence "more bad" in June
(The Mess That Greenspan Made, 6/30/09)
