Consumer confidence has now tanked to its lowest level in 26 years, according to a Reuters/University of Michigan survey. The preliminary index of consumer sentiment plunged to 63.2 this month. You’d have to reach all the way back to 1982, when unemployment was 11% to find numbers that bad. Deutsche Bank’s interpretation:
March retail sales are not reported until next week, but some of the leading indicators of consumption, such as chain store sales and unit motor vehicle sales, suggest we are likely to see continued weakness. In fact, real personal consumption has been more or less stagnant since November of last year. Until consumers’ perceptions of economic prospects improve, spending is likely to remain in the doldrums—possibly even contract.
This is why the recent collapse in consumer confidence, particularly future expectations, is such an ominous sign. (Remember that March expectations sunk to the lowest level since the start of the 1974-75 recession.) As such, this morning’s preliminary report on April consumer sentiment (69.0 vs. 69.5) is of particular interest to us. Given the seemingly relentless pressure on gasoline and food prices, we will also be closely monitoring the inflation expectations data. In March, median 1-year expectations were 4.3% and 5-10 year expectations were 2.9%.
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