Economy Watch: Consumers Don’t Like the Looks of the Economy
- May 18, 2015
Do consumers have the jitters? A case of nerves? That’s happened before, and it always has the potential to cut into retail sales, and thus impact the property types that retail sales support, namely retail and less directly, industrial. Except for some positives in employment, such as monthly hiring in April and the very low unemployment claims, the economic news recently hasn’t been particularly good, and it seems to be affecting consumer sentiment. Ever since the recession, which hit hard and fast, consumers seems to be a little more easily spooked, even when the news has been only mildly bad (such as recently).
In any case, the University of Michigan reported on Friday that its headline consumer sentiment index declined to a seven-month low of 88.6 in mid-May, compared with 95.9 in mid-April for a 7.6 percent drop for the month. The Current Economic Conditions index fell from 107 to 99.8, and the Index of Consumer Expectations was down from 88.8 to 81.5. The headline and the components are all are still higher than a year ago (and each monthly movement of the index can be interpreted as noise), but even so, there’s a case to be made that consumers are a feeling little skittish. Surveys of Consumers chief economist Richard Curtin put it this way in a statement: “Consumers became increasingly convinced that there would be no quick and robust rebound following the dismal first quarter. The decline was widespread among all age and income subgroups as well as across all regions of the country.”
Another factor in any recent jitters is probably the edging up of the price of gas. This winter, gas was as cheap as it’s been since the worst of the recession (recall that in the summer of 2008, the price nearly set records), but as spring arrived, so did higher prices. According to AAA’s Fuel Gauge Report, the current average price for a gallon of regular is $2.702, up from $2.658 a week ago, and $2.429 a month ago. That’s still a considerable break from a year ago, when the average was $3.647, but even so the upward creep, combined with some of the other first-quarter news, might be enough to perturb consumer mindsets.
And, indeed, retail sales were flat in April, as the government reported last week. On the other hand, however consumers feel about saving their money by taking fewer trips to the mall—and probably a lot fewer trips to the likes of mid-market department stores—they aren’t dialing back on online purchasing just year. Also at the end of last week, the Census Bureau released the latest quarterly e-commerce numbers, and once again, Internet-based sales were up (non-store retailing, as the government puts it). U.S. non-store retail sales for the first quarter of 2015, adjusted for seasonal variation but not for price changes, totaled $80.3 billion, an increase of 3.5 percent from the fourth quarter of 2014. That’s true to the persistent pattern of increase in e-tailing for some years.