Friday, July 10, 2009
After improving steadily through the spring when "green shoots" were abundant, the mood of the American consumer darkened suddenly in July as indicated by the Reuters/University of Michigan consumer sentiment index which tumbled more than six points.
The overall index was down from 70.8 in June to a mid-July reading of 64.6, however, the important "expectations" component paced the decline, down more than eight points, from 69.2 to 60.9, as hopes for a second half recovery continue to dim.
Rising unemployment, continuing waves of foreclosures, rising gasoline prices, and a flagging stock market all contributed to pushing this index below the level seen during the three months of spring when the average reading was over 68.
This bodes ill for next week's retail sales, a report that has seen declines in two of the last three months. Clearly, there will be no abrupt return to "business as usual" for the U.S. consumer, a group that still accounts for more than two-thirds of all U.S. economic activity.