Consumer Sentiment: Lingering Problem

The Lehmann Letter (SM)

Households remain battered and bruised by the recession’s assault on their balance sheets.

Yesterday’s letter dealt with the uptick in June Consumer Confidence as reported by the Conference Board. But Consumer Conference has not made a full recovery.

This morning’s Wall Street Journal has an article by Spencer Jakab on a closely related measure of consumer sentiment:

“The Patient Is Improving but Still Sickly”

http://online.wsj.com/articles/the-patient-is-improving-but-still-sickly-ahead-of-the-tape-1403809051

The University of Michigan’s Survey of Consumer Sentiment is similar to the Conference Board’s measure.

At the end of his article Mr. Jakab makes this crucial observation:

“…This month marks the fifth anniversary of the recession’s final month, and both the preliminary and projected final Michigan sentiment readings of 81.2 and 81.9, respectively, look low compared with history. Taking the five-year point after each of the previous four recessions, the Michigan sentiment score ranged from 92.1 to 94 and averaged 93.4. In the case of the 1987 reading, the one for September was used instead of November due to a brief plunge in the index following that October’s stock-market crash.

“Considering how much time has passed since the last recession ended, consumers still look surprisingly sickly.”

That’s a hard-hitting final sentence and a good transition to another article by Josh Mitchell in today’s Journal:

“Consumer Spending Rose Modestly in May”

http://online.wsj.com/articles/consumer-spending-rises-on-higher-inflation-1403786172

Mr. Mitchell begins:

“Americans spent cautiously in May despite stronger income growth, a weak performance that indicates the economy is struggling to expand in the first half of the year….”

Households remain battered and bruised by the recession’s assault on their balance sheets.

(To be fully informed visit http://www.beyourowneconomist.com/)

© 2014 Michael B. Lehmann