Consumer Attitudes July 2015

Americans’ attitudes soured in July 2015 according to various measures of consumer outlooks.  Consumer Sentiment, put out by the University of Michigan, was off slightly, falling to 93.1 from 93.3 a month earlier.  The Conference Board’s Consumer Confidence Index dropped to 90.9 from June’s downwardly revised count of 99.8 (originally 101.4).  Bloomberg’s Consumer Comfort Index (at 40.5), which is compiled weekly, fell in each release during July.  With these indicators it is not so much the absolute number but the trending direction that Atlas watches, with an upward bias generally seen as favorable.

Most of the weakness originates from Americans’ presumption about what lies ahead versus their current situation.  Within the Consumer Sentiment report is a measure of expectations, and it fell to 84.1 from 87.8 in June.  A similar measure in the Consumer Confidence suffered a similar albeit more dramatic fate, falling nearly 13 points to 79.9.  Most of this collapse reflects a sudden pessimism in the jobs outlook; twenty percent of those polled see fewer jobs opening up in the next six months.

Americans’ concern about the here and now is much less pronounced.  The current conditions reading within the University’s index softened slightly to 107.2 from 108.9 a month earlier.  The Conference Board’s present situation component gave back three points for a reading of 107.4

Consumer attitudes are a soft indicator because they measure opinions and not actual behavior, so their value as an indicator can be limited.  With that being said, waning consumer attitudes are more likely to be negative for the economy than positive.  If consumers’ spending begins to parallel their feelings, the second half of the year may not be as robust as many, including the central bank, are expecting, making it even tougher for Janet Yellen to justify raising the overnight lending rate.    (by C. Cox)