On the heels of a report showing US consumer spending declined in September comes fresh data showing that Americans are increasingly worried about their personal finances.
The Reuters/University of Michigan Survey of Consumers final index of sentiment for October slipped to 70.6, compared with 73.5 in September and slightly above expectations of 70.0.
But while overall consumer confidence remained at the highest level since September 2008 – when it stood at 75 – drilling deeper into how Americans feel about their finances suggests all is not so rosy.
Consider the following, from the press release (emphasis FT Alphaville’s):
“The ongoing economic recovery will be unlike any other due to changes in consumer spending preferences,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Typical recoveries are driven by resurgent spending on homes, vehicles, and other large purchases. In the past, these spending preferences were unleashed as soon as the recovery began. Consumers now put debt reduction and increased savings at the top of their agendas rather than the quick resumption of postponed spending plans.
“These changed preferences are due to the extent of the financial reversals suffered by consumers, which spanned every aspect of their economic lives, as well as the widespread recognition among consumers that it will take years for them to fully recover,” Curtin said.
…
Consumers think that the economic policies of the Obama administration and the Federal Reserve have effectively ended the steep economic slide. While most consumers think the unemployment rate is close to its peak, very few think that it will decline anytime soon. Moreover, although consumers think the policies already enacted will benefit the near term economic outlook, they are not more optimistic about longer term prospects-31% expected a favorable long term outlook in October 2009, barely above the 28% recorded in October 2008.
The majority of consumers reported that their finances had worsened in October for the thirteenth consecutive month-the longest and deepest decline in the sixty-year history of the surveys. The fewest consumers ever recorded cited income gains in the October survey-just 12%, about one-third the level that reported income declines (32%). Moreover, for the first time in sixty years, the majority of families expected their incomes to remain unchanged or to decline during the year ahead-and that record was repeated in every monthly survey conducted during 2009.
Consumers reported some improvement in the availability of mortgage credit in October when asked about home buying conditions, but still held very negative views of selling their own home due to price declines. Vehicle buying plans declined as consumers viewed buying conditions less favorably due to fewer available discounts following the expiration of the cash-for-clunkers program. Higher vehicle sales in the 3rd quarter had a big but temporary impact on GDP, with higher vehicle output accounting for nearly half of the 3rd quarter GDP growth.
Grim.
Related links:
Analysts still confident even if US consumers aren’t – FT Alphaville
Outlook for US consumer-facing sectors still poor, S&P says – FT Alphaville
US consumers credit problem – FT Alphaville