Consumer Confidence Falls
Is anyone really surprised the University Of Michigan Consumer Sentiment Index fell today? Anyone? With the jobless claims rising, unemployment ticking up, wages falling, prices rising, the economy weakening, stock prices falling and political rhetoric and media spinning irritating the average American it is no wonder that they are less optimistic about their personal economic futures.
From the survey itself - consumers remained pessimistic about stagnant incomes and job prospects and their view of their own finances was largely unchanged at negative levels. The preliminary reading on the overall index on consumer sentiment was 71.8, down from 74.3 the month before. Of course this was below the median forecast of 74.0 among economists polled by Reuters - and not surprisingly the drop in the index was "unexpected".
As we have stated previously, most consumers believe the last recession had not yet ended. This is an EXTREMELY important that should not be overlooked. When consumers have that attitude they remain locked down on their spending and consumption. In turn this leads to less economic growth since consumption is part of GDP equation. With incomes being impacted by a falling dollar, rising prices at the grocery store and gas pump and an imminent threat of potential job losses, consumers are just scared about their economic future. To wit:
"The majority of consumers are as convinced today as they were two-and-a-half years ago that their incomes will not increase, and the majority anticipate that the unemployment rate will remain stuck at about its current level for the foreseeable future," survey director Richard Curtin said in a statement.
The bottom line here is that consumer attitudes are very important when looking, and hoping for, real organic economic growth. The idea that we can grow an economy by simply stimulating the production side of the equation, which is what we have done so far with stimulus, won't ultimately work if the consumption side is lagging. This is why there cannot ultimately be a "jobless" recovery or a recovery based on artificial inputs.