Friday, July 16, 2010

Consumer Sentiment

Released on 7/16/2010 9:55:00 AM For Jul, 2010

PriorConsensusConsensus RangeActual
Sentiment Index - Level76.0 75.0 71.0  to 76.0 66.5 
The economic recovery is slowing and consumer spirits are falling. Consumer sentiment literally plunged in the mid-July reading, down nearly 10 points to a 66.5 reading that pushes this index back to the lows of last year. Both the expectations and current-conditions components show roughly 10 point drops.

The stock market has been holding up so this report is likely picking up troubles in the jobs market. One positive is today's apparent capping of the Gulf spill, a disaster which hit regional confidence in the monthly consumer confidence report for June. In the end, consumer confidence is tied to income expectations which, given the now fizzling recovery, are in question. Stocks are moving lower following this report with money moving into the safety of Treasuries.
Market Consensus Before Announcement
The Reuter's/University of Michigan's Consumer sentiment index rose to 76.0 for the final June reading, up from 75.5 at mid-June and from 73.6 May and 72.2 in April. Sentiment hit a recent low in mid-April of 69.5. The latest gain in sentiment was led by the current conditions component as the expectations component edged back. Looking ahead, the mid-July reading overall could be lifted by further gains in the stock market and a recent dip in initial jobless claims. But market expectations should still be modest given that unemployment remains high and hiring sluggish.
The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board's survey.  Why Investors Care
[Chart] Consumer sentiment is mainly affected by inflation and employment conditions. However, consumers are also impacted by current events such as bear & bull markets, geopolitical events such as war and terrorist attacks. Investors monitor consumer sentiment because it tends to have an impact on consumer spending over the long run (although not necessarily on a monthly basis.)
Data Source: Haver Analytics