Consumer Sentiment remained weak in October, with the release of the University of Michigan Consumer Sentiment survey by Thompson Reuters suggesting that, “There has been no discernable change in the overall level of consumer confidence during the past four months.” The Consumer Sentiment index lost 8.2 points in July to 67.8 and has remained around that level since. In October the index fell 0.5 points to 67.7. The Survey panel advises that, “At its current level, the Sentiment Index is about 20 index-points below its all-time mean, ranking barely above the bottom decile of all monthly surveys.”
Consumers are increasingly concerned about the slowing economic recovery and persistently high unemployment rate. The present situation index fell 3.0 points to 76.6, with “The majority of consumers report(ing) that the economy had recently weakened …” and “… hearing news of job losses over the past several months.”
There was a slight improvement in the future expectations index, which was up 1.0 points to 61.9. This is encouraging as consumers see the current economic problems as temporary and anticipate the economy was more likely to rise from this point than turn down in the year ahead. Despite this, “nearly six-in-ten consumers thought that overall conditions in the economy would still be unfavorable” in the year ahead.
The index of buying conditions for homes recovered most of the ground lost the previous month, up 6 points to 153 in October. Three quarters of respondents identified that they believe home buying conditions were good, with low prices (63%) and low interest rates (41%) the main reasons. The rebound in the buying conditions index corresponds with the turnaround in housing demand with both new and existing home sales ticking up in recent months.
Despite the very high level of the home buying conditions index (indicating that consumers recognize the favorable housing affordability conditions), consumers appear reluctant to enter the housing market in large numbers. Concerns about continued weakness in the United States economy and the prospect of further increases in the unemployment rate are weighing heavily on consumers decisions.