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There are two competing positions on consumer sentiment right now. One is that it turned south last week, as people worried about their jobs – always a bad sign for spending. The other is that consumer sentiment didn't crap out in July: it fizzled in May. So, it's not a question of whether consumers aren't confident in the U.S. economic machine, it's just a matter of when the collective mood changed.
The July camp is set up around the Reuters/University of Michigan Surveys of Consumers, which makes now the weakest point for consumer sentiment since March. Those who favor May look to domestic demand for foreign goods, which went soft two months ago, bringing the monthly trade deficit to its narrowest since 1999. The U.S. trade gap unexpectedly tightened to $26 billion in May, with exports up 1.6% and imports down 0.6%, according to the U.S. Department of Commerce.
Overall, the U.S. economy declined at a 5.5% annual rate in the first quarter of 2009, but economists believe the second quarter won't be as bad, with a shot at growth during the rest of the year.
What's the net effect of all this? Economic conditions could stay ugly for a bit longer than the experts expected. Meanwhile, the guy on the ground who's worried about his job would be smart to dig in for a long slog.
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