Consumer Sentiment Foretells Dire Outlook for U.S. Economy
In the evening news, you might hear all about how the United States economy is doing well and there isn’t any problem. Be very skeptical of what you hear. An economic slowdown could be fast approaching.
I can’t stress this enough: American consumers are a major force behind the U.S. economy. It’s not the banks or multinational corporations. If American consumers stop spending, an economic slowdown will follow. It’s just that simple.
Right now, American consumers are becoming pessimistic. This is very dangerous. If their pessimism results in them pulling back on spending, things can turn bad very quickly for the U.S. economy.
Here’s some perspective.
According to a recent survey by Bankrate.com, a personal finance web site, over 40% of everyday Americans believe that either a recession has already begun in the U.S., will begin with the next six months, or will begin within a year. (Source: “State of the Economy,” Bankrate.com, last accessed July 3, 2019.)
In technical terms, a recession is when an economy sees negative growth for two consecutive quarters. But you have to keep in mind, we are talking about average Americans here. They don’t think in those terms. A recession for them means job losses, digging into savings, not being able to take a loan, and so on and so forth.
If a lot of Americans are expecting a recession, don’t you think they will think twice before buying a house, a car, furniture, and other such things?
Consumer Confidence Tumbles to 21-Month Low
The survey by Bankrate.com isn’t the only thing saying Americans are turning pessimistic.
Look at the Conference Board Consumer Confidence Index. It’s based on a survey of average Americans that asks how they see the current economic situation and what they expect going forward.
In June, this measure of consumer confidence declined to its lowest level since September 2017. The Consumer Confidence Index stood at 121.5 in June, down from 131.3 in May. (Source: “Consumer Confidence Survey,” The Conference Board, June 25, 2019.)
I can’t say it enough: Americans becoming pessimistic isn’t good for the U.S. economy.
U.S. Economic Outlook: Trouble Ahead
Dear reader, each day as I look at the economic data and statistics about consumer sentiment, my convictions that the U.S. is headed toward an economic slowdown get stronger.
Mind you, this is still in the making. We are not seeing extreme pessimism just yet. But, it’s very clear that sentiment is turning. The longer this prevails, the worse it will be for the U.S. economy.
With all this said, let me add this: the next slowdown in the U.S. could be severe and last much longer than the previous one.
I will end with an interesting note: according to the Association of Pool & Spa Professionals, residential pool construction has been facing a lot of headwinds in the U.S. economy. In 2017, just 75,000 pools were constructed in the country. In 2008, this figure was 129,000. (Source: “Americans are Building Fewer Pools,” Bloomberg, July 3, 2019.)
To me, this is an indicator that average Americans never really recovered from the previous recession. What will happen to them in the next recession?