Today’s item from “the economy doesn’t make sense” file:
The University of Michigan consumer sentiment survey released today shows American consumers were less confident in July than June, when they weren’t all that snappy, either.
Consumer confidence slipped in July as consumers anticipated that their personal finances would improve more slowly than they had anticipated several months ago. “While consumers believe the economic free-fall is now over, consumers see little reason to believe that the economic stimulus package will improve their finances anytime soon,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Financial reversals were reported with equal frequency across all income subgroups, as was the expectation that joblessness would continue to increase. “It is difficult to determine whether the recent loss in confidence simple reflects the impatience of consumers or the sprouting of changed assessments of the effectiveness of the stimulus policies,” noted Curtin. In either event, “economic apprehensions can be expected to increase along with rising unemployment and stagnant incomes during the months ahead,” according to Curtin. Although consumer spending will improve during the balance of 2009, total personal consumption expenditures will post an lackluster increase of 1.5% during 2010.
What’s the confusion? Cash for Clunkers brought tens of thousands of Americans out of their shell to buy new cars, thanks to the government handout. And while it’s true “free money” is attractive, many of those consumers also committed themselves to five (or more) years of loan payments. If you were apprehensive about the economy and your status in it, why would you do that?
The survey also said that buying plans for homes and vehicles declined in July.
Consumers also had less faith in the government’s handling of the economy in July. Those holding an unfavorable view increased from 28 to 32 percent.
The “recession is almost over” narrative, and the one that says things are looking up, are increasingly getting attention in the media. But the public isn’t buying it. At least, not yet.