Consumer Sentiment Rises - Still In Recession Territory

Consumers are feeling more optimistic.  That is the good news.  Unfortunately, they are as optimistic today as they usually are during a recession.  In the University of Michigan's mid-month release today the index rose to 74.0 vs 69.9 in December.   While the index has been moving up since the August lows of 55.7, following the debt ceiling debacle and the blowout of the Euro-Zone crisis, it has yet to attain the levels from the beginning of 2011.  

The composite components both showed gains with expectations up nearly 5 points to 68.4 and current conditions up 3 points to 82.6.  However, let us not forget that gasoline prices fell sharply late last year which acted as about a $60 Billion tax cut for consumers going into the holiday shopping period.   Those extra dollars in their wallets, combined with a relaxation of headline driven anxiety, has allowed for consumers to regain their composure somewhat.   This is why, as we have discussed recently, that many of the economic gains seen in the 3rd and 4th quarters are likely ephemeral as the "pent up" demand caused by the economic shut down over the summer has likely run the majority of its course.

Currently, although it will be changed on the 26th of this month, the UofM index is part of the Leading Economic Indicators index.  I want to suggest that consumer sentiment is really more of a coincident indicator at best.  As you can ...

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