Feeling more upbeat on the economy? Nobody believes you

Wall Street desperately wants American consumers to be feeling better. And they are this month, according to the latest national consumer-confidence survey by Reuters and the University of Michigan.

But the survey's overseers are advising the rest of us to pretty much ignore the upturn in confidence, saying it most likely is the proverbial "dead cat bounce."

In other words, there's no confidence in the confidence number.

The Reuters/UofM consumer sentiment index rose to 61.2 this month from the June reading of 56.4, which was a 28-year low. The survey's index of consumer expectations also rose, to 53.5 from 49.2 in June.

"Even after the small July gain, the overall level of consumer confidence is dismal and still points toward declines in the pace of spending in late 2008 and early 2009," said Richard Curtin, director of the survey.

Although it's possible that the uptick indicates that consumers had "overestimated the extent of the economic damage," don't bet on it, Curtin said.

"It is more likely that the gains reflect a 'dead-cat bounce,' a phenomena that has been repeatedly observed over the past 50 years: Following a steep decline in confidence, a small gain is recorded before confidence resumes its downward slide," he said. (ASPCA warning: Do not try this on cats at home.)

One highlight from the July survey: Half of consumers expected their living standards to decline in the year ahead.

"The appraisals of consumers of their own finances as well as conditions in the national economy remained very negative, near the worst levels recorded in the 50-year history of the surveys," Curtin said.

Reuters/UofM offered not a single word on that old "it's-always-darkest-before-the-dawn" concept. That apparently will have to wait for a much lower reading on the indexes.

Comments

[Matt]

Even the price of dead-cats are going up.

[RICHARD HONICKY]

Negative information predominates the news, in good economic times and bad. News media people interview people for a story that they have already written, at least in their heads. Facts which do not fit the "slant" of the story are dismissed. Discounting of contradictory facts appears to me to be what is going on right now with the consumer's index. Many consumers are near retirement or are retired and their financial situation is stable. People who used their home equity as their piggy-bank to finance an unsustainable life-style have to change the behavior that got them into the situation they are in. Many others, like myself, look on, shaking our heads, and saying to ourselves: "some people can only learn through the school of hard knocks." When the financially troubled ones climb out of their situation, they will be "older and wiser."

[John Williams]

If you really want to understand the reason why this is happening and why an economic depression will happen read about the American money institute and the economic reforms they are trying to create.
There is an fundamental economic mechanism that causes this to happen but it takes a very long time to build up. Like around 70 years.

[Jim Johnson CRS]

Nice blog! The economy does not look good for the Bend Oregon real estate market. It is a good time to buy though.

[Andy]

I share your pessimism and feel that it will take time to work through all this mess and that the government cannot spend us out of this hole. Great to find this blog as well!