Economic Sentiment is Split
Floyd Norris points out an oddity of the general sentiment: People seem to think the economy is improving — but their personal finacial situation is not:
“AMERICANS are becoming more optimistic about the prospects for the economy, but are still concerned about their own financial situation.
For the first time in six years, at least half of Americans questioned for the Thomson Reuters/University of Michigan consumer sentiment index said they believed that business conditions had improved over the previous year, according to the preliminary results from the February survey.”
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Optimism for the Economy, Less for Themselves
click for ginormous chart
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Source:
Many Americans See Economy Improving, but Not for Them
FLOYD NORRIS
NYT, February 18, 2011
http://www.nytimes.com/2011/02/19/business/economy/19charts.html
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February 19th, 2011 at 12:15 pm
Simply put then, this is a study of denial as the light at the end of the tunnel. There is much left unsaid about re-terioration, while the old form factors are de-teriorating.
February 19th, 2011 at 12:16 pm
The chart doesn’t prove its own assertion, though. The chart headline says that people don’t feel that their financial situation is getting better.
But according to the chart’s data, ~45% of people said that their family finances were getting worse in early 2010. 37% say it’s getting worse now–the lowest level in 2 years. Meanwhile, about 22% say their finances were getting better in early 2010. About 28% say it’s getting better now.
So on the face of it, the headline is flat wrong.
February 19th, 2011 at 12:37 pm
First of all, the broad population has no ability to predict the future (just like the majority of the economists.) If they could – they wouldn’t be chasing RE during and even after the RE bubble peaked.
Second, this is exactly what the Printer in Chief Ben Bernanke is counting on: juice up the stock market, make large chunk of the population feel better, while making only top 5-10% actually richer (which is evident from last 2 charts- 10% are confident that their incomes will be significantly higher and will outpace inflation.) But, since even by their own admission “AMERICANS are becoming more optimistic about the prospects for the economy, but are still concerned about their own financial situation” if that materializes, how long can bankers and traders flip NFLX to each other until the market dives hard one more time?
February 19th, 2011 at 12:46 pm
Makes sense to me. Most wealth of most people comes from housing. They read about the economy picking up and others better off but not themselves – until housing picks up again and prices increase another 10% or so. That and flat wages.
February 19th, 2011 at 12:46 pm
for the general population a good economy means higher Stock Market(period).
Not to mention that almost 50% of them may have investment through retirement funds, hence they feel better off with higher indexes.
But the FED conundrum is what to do with commodities also going higher, in some part due to limited supply some part due to cartel manipulations and in some part due to speculative money inflow.
IMO the only way out of the debt driven recession/depression is to inflate your way out preferably with higher wage/Asset inflation than commodities, but its not working perfectly.
If I was the FED any time in the near future I would try to spook the speculators out of commodities without doing too much damage to the stock market.
But I am not sure if it will work, what if this time the biggest factor for commodities price rise is supply/demand imbalance??
February 19th, 2011 at 12:47 pm
Martin Armstrong’s take on things:
http://www.martinarmstrong.org/files/Sovereign%20Debt%20Crisis%20Dancing%20With%20Death%20%202-9-2011.pdf
in a nutshell- SELL (any and all) government bonds
February 19th, 2011 at 12:56 pm
I’m wondering if this is boomer related. Many of them won’t be going back to their previous lifestyles. All many of them are offered are the hand me down jobs they imposed on others
February 19th, 2011 at 1:50 pm
FWIW, Rasmussen’s daily sentiment tracker has been falling rapidly over the last week but it is a volatile index. Worth keeping an eye on though:
http://www.rasmussenreports.com/public_content/business/indexes/rasmussen_consumer_index/rasmussen_consumer_index
February 19th, 2011 at 1:53 pm
Absolutely.
Unfortunately, 90 percent of Americans base their wealth on asset appreciation(single family housing). That’s not in the cards for most. And based on the explosion in multi-family construction a major paradigm shift has occurred.
February 19th, 2011 at 2:14 pm
HTCMSI,
re: BBoomers, how apt is this http://www.reec.nsw.edu.au/geo/scient/text/rsap6.htm ‘metaphor’?
or, is it, more, like this http://www.cse.csiro.au/research/rodents/focus.htm ?
http://www.thefreedictionary.com/metaphor
February 19th, 2011 at 3:52 pm
According to today’s Wall Street Journal:
1. 39% of Americans have experienced one or more of the following since 2007:
a. been foreclosed upon
b. been unemployed
c. been underwater on their mortgage
d. been more than 2 months behind on a mortgage payment.
2. Among American households approaching retirement (60 yrs of age), only 8% of them have an IRA/401K account balance of at least $630,000 which can produce a predictable payout of $40K per year.
No wonder most Americans think their personal financial prosects aren’t so great — it’s becasue they’re not.
.
February 19th, 2011 at 4:17 pm
this is exactly what the Printer in Chief Ben Bernanke is counting on: juice up the stock market, make large chunk of the population feel better, while making only top 5-10% actually richer… how long can bankers and traders flip NFLX to each other until the market dives hard one more time?
Uncle Ben hasn’t been able to repair housing or employment and is praying that the nobs on CNBC will be able to convince the proles that the indexes are for real before his stock balloon pops like it did during the flash crash (the miraculous turnaround just before the nobs could scream “-1000 now!”) God bless the PPT!
Just wondering – does the PPT have a budget?
February 19th, 2011 at 7:35 pm
I agree with the above comments in general. Bernanke wanted to prop market up to get people to think things were better. Second, since home prices have started to drift lower the middle class people think their main asset is going lower.
This cannot remain for too long though.
Either the stock market psychology boost helps housing make a bottom or the housing mess weighs too heavily and the market and economy gets pulled back down.
Heaven help us if the latter happens because the Fed is already at its most accommodating point in its history. They have very few bullets left.
February 19th, 2011 at 8:22 pm
Sentiment over personal finances moves up and down with fuel prices as much as anything. With gasoline at winter highs not seen since 2008, you can expect sentiment to only sour as gas moves from the current $3 to $4 or higher this summer.
Pessimism/optimism over individual financial conditions isn’t anything to worry about. As long as Americans aren’t marching on their state capitols in protest like the Egyptians, everything’s fine and business as usual.
February 19th, 2011 at 9:05 pm
This merely reflects the massive disconnection between the dominant narratives in the Traditional Media and the reality that most Americans face. That’s why “deficit reduction” has become the dominant issue in Washington, while “job creation” is the dominant issue with most Americans.
Those who live inside the Beltway Bubble are convinced the economy is improving; they’re ignoring the fact that fundamentals are basically the same, the “Masters of the Universe” are STILL hollowing out the US economy. Of course if you’re one of the wealthy elites, then the prospect of more tax cuts along with more wage cuts (evidenced by the coordinated, national attacks on public employee labor unions) means you’ll be getting an even larger share of the wealth.
February 19th, 2011 at 9:20 pm
I’m sure things would have been better without the Fed printing money. I can see the economy getting better (I frequently read Phil’s Stock World) but the inflation continues to hike up. It’s maddening.
February 20th, 2011 at 6:16 am
[...] Americans think the economy is getting better but that their lives aren’t. [...]
February 20th, 2011 at 7:54 am
There will be plenty of shocked people and lamentations of “who could have known” when the shit commences hitting the fan. Our shot of financial morphine is wearing off, and there’s no more to be had. Meanwhile, our national economic gut wound has turned gangrenous.