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Friday, September 17, 2010

Consumer Sentiment Decline Not Unexpected

Bloomberg reports today in a story headline that the "U.S. Michigan Consumer Sentiment Index Unexpectedly Declines." However, the decline was not unexpected for those following the Gallup Economic Confidence Index. On Tuesday, Sept. 14, Gallup noted that the decline in economic confidence during the first two weeks of September suggested a similar decline in the Consumer Sentiment Index.

More importantly, consumers are more pessimistic now about the future direction of the U.S. economy than they were a year ago. Add in a probable uptick in the unemployment rate, and it is not hard to understand why a majority of Americans feel the condition of the economy will be the same or worse in a year.

It is essential that the Fed take these negative expectations on the part of many Americans into account as they deliberate next week. Otherwise, such expectations can easily become self-fulfilling.


Anonymous said...
September 19, 2010 at 6:15 PM  

Mr. Jacobs,

You don't seem to get many comments on this blog, but I just wanted to let you know I find your commentary very useful - thanks!

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