Consumer Confidence Rises for the 4th Straight Month

LA TIMES -- Confidence among U.S. consumers rose this month for a fourth straight time, reflecting signs that the worst of the recession has passed. The Reuters/University of Michigan final index of consumer sentiment gained to 70.8, the highest level since February 2008, from 68.7 in May.

Recent reports show some areas of the economy, such as housing and manufacturing, are seeing a smaller pace of decline, consistent with the Federal Reserve's projection this week that the slump is "slowing." Government data today indicated that efforts to revive the economy are allowing consumers to spend even with unemployment at a 25-year high. The data also showed savings surged to the highest level since 1993.

The last time the Michigan consumer sentiment index increased in four consecutive months was the period from October 2001 to January 2002, which signalled the end of the 2001 recession (see shaded area in chart above). The four-month cumulative increase of 14.5 points in consumer sentiment from March to June 2009 (see shaded area in chart) is even greater than the 11.2 point increase in late 2001-early 2002.

Comments

[Ali Mogharabi:]

Good points, but I don't think it makes sense to compare the 2001 recession, which was also heavily driven by 9/11, to what we are currently experiencing. In addition, if you look at the expectation index of this survey, you will see that it actually reversed its course in June. It declined after 3 striaght months of increase. And combine this with higher savings that we are seeing, it doesn't look like the consumer will be breaking the bank (as it did the last 20 yrs) anytime soon again.

Jun 28 02:00 PM

[John Lounsbury:]

Ali - - -

You make some good points, and I agree with them. I worry that 2009 could be like an unirrigated lawn: covered with nice green shoots all spring and then withering to brown fuzz by August.

Prof. Perry - - -

It bothers me that the slope of the trend in your first example (2001) is up but the slope of the trend in the second example (2009) is down. It is true that the peak in 2009 is much higher than in 2001, but wasn't it coming off a much lower level? And the gains are decelerating since the peak in April.

I find the sentiment numbers only mildly hopeful. I hope the three month trend line from April to June is not continued.

Jun 28 02:23 PM

[Old Trader:]

How much of the rise in sentiment was driven by the rally in the market? I suspect that was the prime driver in the confidence numbers. I have numerous friends/acquaintances who don't really "follow" the market, but have exposure, via 401ks, IRAs, etc., and when the talk turns to economic conditions, without exception, they all point to the rebound in the market as being the sole "bright spot" in the picture. Otherwise, they still talk about coming lay-offs and slow/no business at their places of employment, and those who are self-employed are struggling to stay afloat.

Jun 28 02:50 PM

[dcb:]

Consumer confidence weakens. ABC's Consumer Confidence Index fell to -53, down 4 this week and just a point off its all-time low from Jan. 25. The long-term average is -12. Only 39% of Americans rate their own finances positively, the lowest in 23 years of weekly polls.

this is from rachael granby (SA) june 24th

Jun 28 07:41 PM