The University of Michigan/Reuters consumer sentiment numbers almost containly contain too much data. A careful reading of the figures show that they often conflict with one another leaving nothing but a puzzle.
The most important figure for June is probably that expectations fell to 65.4 from 69.4. Consumers are becoming more worried about jobs, energy costs, and the general health of the economy as they look out over the next few months.
The top-line figure from the survey, the one most often quoted, is that the consumer sentiment index rose to 69 in mid-June from 68.7 in May. According to MarketWatch, economists expected that number to be 71.
The expectations figure in the study will probably get worse over the next few months primarily for two reasons. Unemployment will continue to rise and could hit 10% by Labor Day. The psychological impact of the first double-digit jobless number since 1982 could shake Americans to the bone. The will be especially true if a number of economists see the figure going toward 11% or at least staying above 10% for a quarter or more.
The other wid card is the price of oil, and especially gasoline. The nationwide average for a gallon of regular is $2.63 this week. Rising oil prices or a drop in demand which could be caused by a number of factors including summer travel will lead consumers to fret over how much the cost of energy will cut into household budgets.
Sentiment, at least as it measures concerns in the future, is likely to drop in the next few surveys.
Douglas A. McIntyre
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