The University of Michigan’s consumer sentiment index came in at 67.8 for July, vs. an expected value of 67.5. While the result is slightly higher than expected, it represents a substantial drop the the 76.0 level recorded in June.
Nevertheless, markets have rallied since the release.
Here’s the data:
Confidence tumbled in July due to height- ened concerns about personal financial prospects as well as the overall economic outlook. Income and job prospects were extraordinarily weak and those bleak prospects have made consumers more cautious spenders. Rather than the economy gaining strength, consumers now anticipate a slowing pace of growth, and rather than economic policies acting to improve prospects, the policies of the Obama ad- ministration have increased economic uncertainty among consumers. Overall, the data suggest that the current slowdown in spending is likely to persist well into 2011 as it reflects a widespread and general realignment of job and wage expectations. While a double dip is still unlikely, it now has a non-ignorable 25% probability.
“Scarce jobs and stagnating incomes have been the top concerns of con- sumers for some time. What changed in July was their recognition that the anticipated slowdown in the economy will keep jobs scarce for some time, while their uncertainties about fu- ture prospects were increased by the policies of the Obama administration. Rather than itching to re- sume old spending habits, consumers have begun to actively embrace a more defensive outlook, making them more likely to further pare their debt and increase saving and reserve funds. This new defensive posture could result in even slower eco- nomic growth and fewer jobs in the future.”