But job worries abound
The University of Michigan's Index of Consumer Sentiment rose from 64.6 in mid-July to 66.0 but fell from June's reading of 70.8. The Director of the Reuters/University of Michigan Surveys of Consumers said last month that consumers are convinced that the steepest declines in the economy are over but few anticipate a quick end to the recession.
The rise from November's low of 55.3 clearly signals that many believe the worst is past, but July's step backwards suggests consumers remain tentative about a recovery amid rising unemployment and job insecurities. Just "14% of all consumers" believe the labor market will improve in the year ahead, according to the survey.
Moreover, the results indicated that recent income gains were reported by the fewest consumers in the more than sixty-year history of the survey.
And a worsening financial situation was reported by the majority of consumers, with financial reversals as common among upper as lower income households.
Sentiment is important because consumer spending makes up 70% of GDP. If the public continues to focus on debt reduction and savings, it seems unlikely that we will experience anything other than a very mild economic recovery.
Overall, not very encouraging but following four-straight monthly increases in sentiment, a pullback shouldn't be all that surprising.
Other indicators, including both ISM's, the Leading Index, and a number of recent earnings reports suggesting stabilization indicate that a mild recovery is likely to start this year.
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