Sentiment Slips as Consumer Fears Remain Apparent
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The survey of consumers, conducted by Reuters and The University of Michigan was released today with sentiment down from 73.5 to 70.6 for the month of October. This number is however still widely ahead of the 57.6 last year in the same month.
The survey is designed to measure the confidence of the consumer in the economy and the intentions of the consumer on how to spend money going forward.
The majority of consumers reported for the 13th consecutive month that their income had worsened in the month of October, along with the fewest number of consumers in the 60-year history of the surveys reporting an increase in income.
In the home market consumers reported slight improvement in the mortgage credit being available for buying a home, while still not favoring selling their homes due to the dip in the real estate market.
As expected, consumers declined their plans to buy a car in October, citing the loss of incentives from the cash-for-clunkers program in the month prior. Higher vehicle sales, due to government stimulus, accounted for nearly half of the GDP growth in the third quarter according to the report.
"These grim financial evaluations, coupled with (consumers') intentions to increase savings and decrease their indebtedness, will limit any rebound in consumer spending,” the report stated.
According to Art Hogan, Jefferies' Chief Market analyst, the unemployment rate is going to continue to weigh on the mind of the consumer. "If I was running a company, would I be hiring and giving employees raises or toeing the line right now?" Hogan told StreetInsider.com.
Hogan iterated that it is going to be hard for the economy to turn around, even on the back of the strong GDP numbers from yesterday, when consumers are looking at an unemployment rate that is nearing 10 percent. However the 6-month upward trend of the survey is encouraging.
The concerns of the consumer are going to make a quick turn-around difficult. A grinding move forward is to be expected till consumer fears revert.
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