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Decline In Consumer Sentiment Echos 2007


No one should be surprised. Consumer sentiment will come full circle.

Christopher-LemieuxSMBullion.Directory precious metals analysis 15 May, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Twitter @Lemieux_26

The consumer sentiment indicator, put out by the University of Michigan, just missed expectations by the biggest margin ever, falling to 88.6 with analysts expected a hardy 95.9. Should Wall St., or even Main St., be surprised? No. In “Is Consumer Sentiment a Peak Indicator,” the current string of sentiment prints almost match 2006-7 piecemeal. It also briefly suggests that consumer sentiment is much like investing behavior.

According to the Bloomberg Business article following the horrid miss, Richard Curtin, director of the Michigan Survey of Consumers, said:

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To be sure, the recent decline in consumer confidence does not indicate an incipient downturn in consumption and residential investment. Rather the data indicates a reluctant acceptance on the part of consumers that economic growth will remain near the same lackluster pace recorded during the past several years.

So, is Curtin saying that as the economy gets better, the sentiment of consumers will weaken? Perhaps, it could be the fact that gas prices have risen 7.9 percent in April alone. Or, it could be that the sentiment gauge did not that the top income brackets to support the lofty peak indicator, as all income brackets were down in the dumps last month.

Just to recap:

Consumer sentiment hit the launch pad in August 2006, only to begin to spudder out in August of 2007. A series of mediocre prints followed until the country was officially in recession. From August 2006 to August 2007, consumer sentiment came full circle, starting at 82 (Aug. 2006) and ending at 83.4 (Aug. 2007) with a high of 96.9 in January 2007.

Again, consumer sentiment hit the launch pad in August but of 2014, starting at 82.5. Although there is only a print until May 2015, it is mirroring the same pattern with a current high of 98.1 in January 2015. Once the high was hit in both cases (this current cycle still pending), consumer sentiment quickly faltered.

One thing is for sure, the economy has never – and likely will never – add up to the hopes and dreams of mainstream economists. Maybe Dr. Paul Wilmott is right, economists are on the autistic spectrum and unable to relate and process with what is actually happening around them.

After all, they all thought spending would amplify. In my previous article (hyperlinked above), it noted how the March print of the Bloomberg Consumer Comfort Indicator (CCI) reached levels not seen since 2007. Bloomberg also stated that “Americans viewed the U.S. economy in a more favorable light and said it was a better time to spend.” Ouch.

April retail sales showed absolutely no indication that a consumer even existed.

Historical UofM Consumer Sentiment Prints since 1978.

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