U.S. consumers are so stupid. Don't they realize we are in the midst of an economic recovery? Obama and Wall Street say so. How could these stupid consumers be less confident when only 20% of them are unemployed, oil prices are up 120% since January, they just got their 3rd notice of foreclosure from the bank, and the credit card company just cancelled their last line of credit? According to the MSM and the gurus on Wall Street, they should be booking a trip to Disney World and leasing a new BMW X5.
There appears to be a major flaw in this survey. They are busy surveying average Americans trying to get by. They need to change the survey and ask Goldman Sachs employees how they are feeling. They need to survey government buraucrats who make twice what the average American makes. They need to survey lobbyists in Washington DC. Business is booming for these people. The sentiment index would soar to 120 if they just asked the right people.
It is time for some unbridled optimism. The DOW is above 10,000. Bankers are making billions again. Everyone is about to get healthcare. It is time to rejoice. Enough of this reality based pessimism. Who's with me? We're #1. We're #1. Everybody.
U.S. Michigan Sentiment Index Decreased to 69.4 (Update1)
Oct. 16 (Bloomberg) -- Confidence among U.S. consumers fell more than forecast in October, a reminder that households remain nervous about the strength of the emerging economic recovery.
The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.4 from 73.5 in September, which was the highest in more than a year. Measures of expectations for six months ahead and current conditions both fell. The index averaged 87.3 in 12 months leading to December 2007, when the recession began.
The highest unemployment rate in 26 years threatens to restrain consumer spending as the U.S. enters the Christmas- holiday shopping period. Minutes from last month’s Federal Reserve meeting show policy makers are still concerned that rising unemployment will curb consumer spending and lead to an anemic recovery.
“This is probably giving us a more accurate reading of what consumers are feeling,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who had the lowest forecast in the Bloomberg News survey. “They’re very concerned about how long unemployment is going to stay high, and they’ve very concerned about their own personal finances.”
The index was forecast to dip to 73.3 this month, according to a Bloomberg survey of 64 economists. Estimates ranged from 70 to 77.1.
The University of Michigan measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items such as cars and homes, dropped to 72.1 from 73.4 in September, which was the highest in a year.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 67.6 from 73.5 in September, which was the highest level in two years.
Consumers in the survey said they expect an inflation rate of 2.8 percent over the next 12 months, compared with 2.2 percent in the September survey.
Over the next five years, the figures tracked by Fed policy makers, Americans expect a 2.9 percent rate of inflation, compared with 2.8 percent in the September survey.
The preliminary Reuters/University of Michigan consumer confidence report reflects responses from about 300 households, compared with 500 for the final survey.
Consumer spending grew at a 2.4 percent annual rate from July to September and will slow to a 1 percent pace in the current quarter as incentives from the government’s stimulus program expire, according to the median estimate of economists in a Bloomberg survey taken this month.
Fed policy makers in last month’s meeting raised their economic projections based on improved housing markets, stabilizing consumer spending and a recovery in growth outside the U.S., the minutes said.
Even so, “many participants noted that the economic recovery was likely to be quite restrained,” the minutes said. “Credit from banks remained difficult to obtain and costly for many borrowers; these conditions were expected to improve only gradually.”
While the Standard & Poor’s 500 stock index closed on Oct. 14 at the highest level in a year, it was down 1.2 percent after the report as General Electric Co. reported sales that trailed analysts’ estimates and Bank of America Corp. posted a loss. The S&P 500 was at 1,083.6 as of 10:02 a.m. in New York.
Companies’ reluctance to add to their workforces may restrain confidence and consumer spending for some time.
“As long as we have unemployment rising in this country, people are going to be cautious,” Levi Strauss & Co. Chief Executive Officer John Anderson said in an interview on Oct. 8. “Until they get their confidence back, until they believe that the future is more optimistic, people are just hunkering down.”
Levi, the closely held maker of blue jeans and other apparel, said mounting joblessness cut third-quarter profit and may crimp holiday sales.
To contact the reporter on this story: Courtney Schlisserman in Washington at firstname.lastname@example.org
Last Updated: October 16, 2009 10:16 EDT