The two prime measures of consumer confidence are trending in the same direction, and that is not a good thing for the economy as a whole. First, it was the Conference Board data and now the Reuters/University of Michigan survey. The readings for the latter this month fell to 73.2 from a May reading of 79.3. Most analysts had expected a deterioration of confidence but not one that steep. In most months the collapse in the price of gasoline would have had an impact, but this time its influence was subdued and, instead, the consumer was far more worried about other things.
The factors that have been at the top of the consumer’s list to worry about include the unemployment situation as well as the uncertainty factor. These have been harped on, so it comes as no shock that they would rank as key issues. The part that has become increasingly interesting is that there are some subtle nuances as far as what people are worried about. The unemployment situation has started to shift a little, as fewer people are worried about their own job security. Now they are concerned about what steps the country will have to take to address the issue, and there is fear that this will cost them.
Analysis: The uncertainty argument is vexing as it always has been. It is not that the world has ever been certain. What makes the uncertainty today so much harder to take than in the past? Two rationales have developed on that topic. The first is that it seems that too much is out of the control of the United States. Europe usually is not a top-of-mind issue for American consumers, but the recent negative news has been relentless and confusing. It is clear that things are not good in Europe, but it is not so clear why that matters directly to the US consumer. That makes for unease. The second factor is that there is remarkably little faith in Congress when it comes to rescuing the economy, as most people seem preoccupied with the impending fiscal cliff and what that means to them.
-Chris Kuehl, NACM economist