U.S. consumer confidence waned in late July to its lowest ebb since April on growing pessimism about the long-term economic outlook, especially about income and jobs, a survey showed on Friday, even as some economists reckon the longest recession in decades may be easing.
The Reuters/University of Michigan Surveys of Consumers said its final July consumer sentiment reading fell to 66.0 from June’s 70.8, though it was slightly higher than economists’ median expectation for a reading of 65.0, according to a Reuters poll.
The index of consumer expectations fell to 63.2 in July’s final reading, from 69.2 in June.
“Consumers believe that the economic free-fall is now over, but consumers see little reason to believe the stimulus policies will improve their financial condition anytime soon,” the Reuters/University of Michigan Surveys of Consumers said in a statement.
On the long-term outlook, 58 percent of respondents said they anticipated bad times, up from 49 percent in May.
Lower income and less favorable job prospects in the next year are key factors making consumers anxious about their financial position, the statement said.
“People are a little more worried about the economy, especially over the labor market and what’s happening in Washington. It’s still consistent with the picture that the economy is bottoming out, but you are not going to get a big bounce in consumer spending,” said David Wyss, chief economist with Standard & Poor’s Ratings Services in New York.
The current conditions index slipped to 70.5 in the final July reading, from 73.2 in June.
U.S. stocks extended losses after the report’s release, but the dollar and safe-haven Treasury bonds traded fairly steady.
“We are going to see the stock market improve, but it has gotten ahead of itself given my expectations of a soft economic recovery. We are going to need a mid-rally correction. This (recent rebound) is the biggest rally we’ve had since the 1930s, and it makes me nervous,” Wyss said.
“Recent income gains were reported by the fewest consumers in the more than 60-year history of the survey in each of the past three months. Reported declines in income, from lost jobs, shorter work hours, cuts in pay or bonuses were also at record levels,” the survey statement said.
We may be seeing a temporary bottoming out, but are still in for a long period of ongoing job losses and little consumer spending. The recent rally has indeed been a phenomenal one, all the more a reason to be concerned about expensive stocks. To get an idea of how low consumer spending may go, please see True Consumption as Percentage of GDP: