Confidence drops sharply
By Peter Boockvar - July 16th, 2010, 10:51AM
July preliminary UoM confidence was awful at 66.5 vs expectations of 74 and down from 76 in June. It’s the lowest since Aug ’09 and down from the highest since Jan ’08 in June, thus a sharp change. Current Conditions fell to 75.5 from 85.6 and the Outlook fell to 60.6 from 69.8. The Outlook is now at the lowest since Mar ’09 when it stood at 53.5. Inflation expectations ticked up by .1% to 2.9%. The UoM survey is via phone and done within the last few days so it is a timely snapshot of consumer sentiment. With a still sluggish labor market at the same time unemployment insurance is ending for many, we can fully understand the consumer nervousness.
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July 16th, 2010 at 1:21 pm
But capX is going to pull us all out of this no doubt. Companies are buying all those computer chips, instead of hiring, and the reason that they see demand for more storage and bandwith is because no one else is working, instead they are at home playing with their cell phones, Ipads, and computers while watching T.V.
July 16th, 2010 at 2:50 pm
Consumer sentiment tells us more about how people felt in the past than about how they’ll spend today. Americans are perpetually dissatisfied with their economic situation, but that doesn’t always keep them from a rather ‘healthy’ consumption pattern.
Example: A guy I know made $7.50/hr in college. It was his first job, and he was always living on ramen noodles so he was dissatisfied.
Then he got his first real job: $50k/yr (computer programmer). Pretty snazzy right? Nope–he said he was “poor” then, because he could only afford a one bedroom apartment and a 4 year old car.
After a few years, he has worked his way into management and married a doctor: $100k/yr for him, $150k/yr for her. They still live in the condo he bought 10 years ago for $250k in Orange County, CA and never took any of the frequent home equity offers they received in the mail. Guess what?
He owns his condo and two new but sensible cars (a minivan and a sedan) free and clear. Income is $250k/yr, and she still has a bit of med school debt but that’s the extent of their liabilities.
Guess what?
He says he’s “poor.”
Sentiment means jack squat.
July 17th, 2010 at 11:08 am
Amazing how we can go from 76 in June as 2-year high , to 66.5 as 1-year low .
Are these numbers this volatile , are they accurate?
How sensitive are they to the economy ?
July 19th, 2010 at 9:30 am
@franklin411 — so your doctor acquaintance, would you say that, relative to his financial standing, he is spending like a “rich” man, or like a “poor” man?
I think your little anecdote makes the case for the validity of consumer sentiment data.