The recession is only over if you ask the right people. While some sectors are starting to see the light at the end of the tunnel, consumers remain concerned. It may be tempting to listen to the experts over the average Joe, but the former don't control 70% of the U.S. economy. So, as long as people are worried abou unemployment (which continues to rise), the levels of debt they carry and whether they're at risk of foreclosure, the recession will live on in the hearts of those who write checks and swipe credit cards.
According to the Reuters/University of Michigan Surveys of Consumers, the preliminary index of sentiment for October fell to 69.4 -- from 73.5 in September. Economists' median expectation was for sentiment to stand its ground at 73.5. The report issued said, that "personal finances have undergone the longest and deepest decline in the 60-year history of the surveys, and few consumers expect their finances to improve anytime soon."
Ouch.
If we're in a recovery or approaching one, increases in personal savings and paying down debt will drag the process out a bit, as neither contributes to that precious consumer spending number that is crucial to an economic up-tick. Over the longer term, however, these activities will probably prevent a temporary recovery built on the same flawed thinking that landed us in the current situation.
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Reader Comments (Page 1 of 1)
10-16-2009 @ 8:47PM
william lindblad said...
I am not in total agreement.
Consumer sentiment is spread over the entire segment, not just those that have economic problems or concerns. What it is really about is how one feels going forward.
What is around the corner?
The economy is weak and contrary to government hype the majority of the U.S. population and that includes the bulk of our business leaders. It is only a matter of time until the pipe must be paid and that is going to mean higher taxes. Since we currently have a Democratic administration with a Congressional majority one can assume that those making 300K and up will be the first targets. As they are not going to get what is needed from that bracket, tax increases are going to be pushed onto the lower levels. Middle class beware, you are an endangered species. Every stage of government has been effected and they all have but one future recourse. It is only a matter of time.
Burgeoning health care costs and the solution are now in the hands of Congress. The energy bill is next. Now we all get to wait and see if the august body can get anything right. Certainly, they are not going to please all but they have a long track record of passing bills that just cost the public more.
10-17-2009 @ 3:43PM
Peter Van Schaik said...
So if the consumer isn't spending, government must. We can't save our way out of a recession. We gain wealth by producing more goods and services to be consumed today or for future consumption, not by saving paper dollars. But there is no incentive for production without demand and production for its own sake is rather pointless. Even Adam Smith knew the whole point of production is consumption.