Friday, September 25, 2009

September Consumer Sentiment – A Positive Sign for the U.S. Economy

U.S. consumer sentiment rose in late September to the highest level since January 2008 as expectations of an economic rebound gathered momentum. This data added to indications the economy is pulling out a lengthy recession more powerfully than many economists had expected a few months ago.

The Reuters/University of Michigan Survey of Consumers said its final index of sentiment for September rose to 73.5 from 65.7 in August. This was above economists’ expectation for a reading of 70.3. The index of consumer expectations rose to 73.5, the highest in two years, from 65.0 in August. The index of current conditions rose to 73.4 in September from 66.6 in August and the survey’s 12-month economic outlook jumped to 88 from 69 August.

The Reuters/University of Michigan Surveys of Consumers, in an upbeat statement, said, “Consumers reported that the economy had already begun to improve and anticipated further gains in the year ahead. The data provide considerable evidence that the economy has already begun to recover.”

There was one note of caution in the statement, “The pace of gains in consumer spending are still expected to be slower than usual due to expected lags in job and income gains as well as the renewed desires of consumers to save and the more limited availability of credit.”

Doubts still persist among some economists though about how much staying power the rebound may have. These economists question what will happen to the economy once the effects of the billions of dollars of government stimulus wear off.

Gary Thayer, a macro-economic strategist with Wells Fargo Advisors in St. Louis did offer a note of caution about business sentiment. He said, “If we can only get business sentiment to improve a bit more, we’d probably go from a yellow light to a green light. If business sentiment picks up, the job situation would improve and consumer sentiment will improve further.”

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