One might observe many individuals being increasingly nervous about the economy in the past couple months. The news has been pretty bad with the U.S. debt downgrade, near default, terrible uncertainty in Europe, and overall economic stagnation in the United States. Ordinarily when consumers have news that is this bad, they tend to reign in their spending in step with their attitudes and expectations. The chart below is a peculiar chart that shows the relationship between consumption and consumer confidence. It shows that there is currently a significant gap between the two.
One might also note that the consumer confidence is a leading indicator of spending. So might this suggest we will see a tightened wallet in the coming months? That is very likely, but there certainly is a prolonged divide happening as well. What could this suggest? Could this be the effects of fiscal and monetary stimulus? Consumer expectations of inflation?
Does anyone else have a better idea about what this chart is telling us?
One might also note that the consumer confidence is a leading indicator of spending. So might this suggest we will see a tightened wallet in the coming months? That is very likely, but there certainly is a prolonged divide happening as well. What could this suggest? Could this be the effects of fiscal and monetary stimulus? Consumer expectations of inflation?
Does anyone else have a better idea about what this chart is telling us?
I wrote a few words about this in my Comerica U.S. Economic Update for September, available on the Comerica website. Basically,the gap between measures of confidence and consumer spending, tens to widen in post-recession periods.
ReplyDeleteRobert Dye via linkedin
I'd add that the more pessimistic outlook given the Euro debt crisis, our own deficit battle,the plunging stock market and poor indicators on the economy is applying more downward pressure to consumer confidence than spending which is typically led by income and job growth.
ReplyDeleteTim Rogers via linkedin