FYI | May 04 2009
By Chris Shaw
It remains far too early for any strong turnaround in the US economy, even though it appears from consumer sentiment numbers that the worst in this downturn may have now passed, as least as it pertains to the US consumer.
As Westpac senior economist Justin Smirk points out, the latest University of Michigan consumer sentiment survey for April that came out at the end of last week showed consumers were becoming less negative, with unemployment expectations at a reading of 56 compared to just 38 at the low in December.
This suggests while consumers still have some fears for their job security, given expectations are for unemployment to top 10% early next year, overall economic conditions are becoming a little more optimistic.
Housing sentiment has also recovered to some extent in recent months as falling prices have improved affordability, though in adjusting the data to factor in employment expectations, Smirk notes while the measure has improved from December it remains in the order of 25% below its long-term average.
Where the data are not yet showing much in the way of a recovery is in the purchases of durables and cars, Smirk noting these measures remain respectively 50% and 30% below their long-term averages at present. This means while the desire of consumers to purchase things is picking up, it remains a long way from giving a strong positive signal on the state of the US economy, meaning consumption is likely to remain at sub-trend levels for some time to come especially given concerns over incomes.
In other words, while there are some so-called “green shoots” of improving economic news, any recovery in the US economy and, as a result, the global economy is likely to be a drawn out process, with 2010 looking a better bet than 2009 for any return to positive growth.
