Nearly all economic indicators are showing that the recovery has entered a soft patch, and the slowdown in the already shallow recovery is beginning to darken the mood among consumers.
The Reuters/University of Michigan survey of consumer sentiment tumbled nearly 10.0 points to 66.0 in mid-July, far below the estimate offered up by Bloomberg of 75.0 and the lowest reading since last August.
It is not as if the unemployment rate has surged back above 10%. And though employment growth has been anemic, the economy stopped shedding jobs late last year.
Still, there are a number of factors that are depressing consumer attitudes, including a falling stock market, a weak housing market, concerns about housing prices, and of course, continued insecurities in the labor market and the obstacles that persist in seeking employment.
Though not directly affecting consumers, the persistent federal deficit, problems overseas and the divisive spirit that has invaded the political arena are all having an indirect impact on sentiment.
I am not in the camp that expects a rare double dip recession, but the erosion in consumer sentiment is something to be concerned about.
If unexpected weakness in retail sales is reflected in the languishing survey of consumer confidence, calls for a new round of economic stimulus will grow. And we could see new moves by the Fed.
With interest rates near zero, quantitative easing by the central bank – hinted at in the latest FOMC minutes – would seem to be the most likely path.
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