A preview of the University of Michigan Confidence index from Deutsche Bank:
This morning’s University of Michigan consumer sentiment data are likely to remain depressed, hovering in recessionary territory. One month ago in the US Economics Weekly, we highlighted three high frequency metrics to track in order to see if the economy was entering recession: consumer confidence, weekly chain-store sales and initial jobless claims. The Michigan data are unquestionably weak. This has also been the case in the weekly Bloomberg consumer comfort index—it was unchanged this week at -49.3, and has essentially never recovered from its 2008-2009 lows. However, while consumer confidence remains in the doldrums, consumer spending continues to rise at a modest pace, notwithstanding August’s small 0.1% gain in ex-auto retail sales. Chain-store sales, depending on the measure—the Redbook or the ICSC data— continue to show consumption gains in the 3% to 4.5% range through early September. These growth rates are consistent with moderate private consumption of around 1.5% in the current quarter. We would become more concerned if these weekly consumer spending tallies broke 2% sharply to the downside, since that was the threshold breached as the economy last slipped into recession. While consumer confidence, as measured by Conference Board has been dreary, it is noteworthy that unlike its University of Michigan counterpart, it has not revisited the lows reached during the recession. The risk of a downturn in consumer spending would rise if the Conference Board series fell toward the 25 to 35 range, or if the weekly Bloomberg consumer comfort series broke out of its current range to the downside.
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