Consumer Outlook Not Looking Too Good

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

Consumer attitude measures have taken a turn for the worse.  The weekly ABC News / Washington Post Consumer Comfort Index has reached a record (22-year) low.  These measures don’t drive spending (which depends more on income growth, wealth, and the consumer’s ability to borrow), but they do reflect the increased strains on household budgets and people’s concerns about future growth.  GDP revisions showed a higher level of income than reported earlier (1Q08 income was revised 1.1% higher) and estimates of saving were revised up accordingly.  The personal savings rate is an imperfect statistic (it’s calculated as a residual, income less taxes and outlays, not measured directly – capital gains are not counted as income, but are spent, distorting the figure).  However, it’s likely that worries about the future have encouraged people to pay down debt or put a little more aside for a rainy day.

In the last five weeks, Treasury mailed or directly deposited 57.4 million tax rebate payments totaling $50.0 billion dollars, or roughly 5% of monthly personal income.  Most of that will be used for savings (or to pay down debt) and a lot will go towards higher food and energy bills.  As a comparison, spending on gasoline rose $52.1 billion over the 12 months ending in April.