Elliott Wave InternationalmyEWISocioniomics.Net
Home > U.S. Economy

The Biggest Part of the Economy Could Be Headed for a Cool Down
Consumer confidence drops to its lowest level since December 2011

By Bob Stokes
Fri, 15 Mar 2013 16:15:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly

If you notice fewer shoppers at the mall, fewer buyers on the car lot, fewer patrons at restaurants and fewer movie goers in coming days and months, don't be surprised. 

Why?
 
Simply put, consumers may feel less inclined to spend money. Economists were surprised by the latest consumer survey.
 
Confidence among American consumers unexpectedly slumped in March, which may signal a cooling in spending, the biggest part of the economy.
 
The Thomson Reuters/University of Michigan preliminary sentiment index for March fell to 71.8, the lowest level since December 2011, from 77.6 in February. The gauge was projected to increase to 78, according to the median estimate of 67 economists surveyed by Bloomberg.
 
Bloomberg, March 15
 
To put the survey in context: During the severe 18-month economic downturn that ended in June 2009, the average index number was 64.2. In the five years before the worst of the financial crisis, the consumer index averaged 89.
 
So after nearly four years of an economic "recovery," the 71.8 figure for March is just 7.6 points higher than the average number during the depths of the financial crisis.  
 
A consumer survey conducted by Yum! Brands Inc. (KFC, Taco Bell and Pizza Hut) apparently confirms a coming reluctance to spend. The CEO of the company said "their research indicates consumers remain uneasy," according to the Bloomberg article.
 
Earlier data from the Rasmussen poll (March 1-2) suggests that the Michigan survey was no surprise.
 
Few Americans believe the economy will be much better in a year, a Rasmussen survey shows.
 
It’s a mood that hearkens back to the days of President Jimmy Carter days; only 25 percent of Americans responding to the poll see economic improvement over the next 12 months. The deeper significance, Rasmussen says: U.S. short-term confidence now matches long-term confidence. And they’re both at new lows, Rasmussen reports.
 
Washington Times, March 5
 
Here's what else this latest consumer sentiment data may suggest.
 
The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation.
 
Conquer the Crash, second edition, p. 91
 
And it now appears that the primary orientation of consumers is that of conservation. Prepare now for a rare juncture in the economy.
 

 


FFS"The clarity of your thoughts is so powerful that I typically read an issue at least a half dozen times." - R.N., Financial Forecast subscriber

The Elliott Wave Financial Forecast is a rational voice in a volatile marketplace with an unrivaled record of providing tomorrow's news today.

It helps you take control of your investments and anticipate the larger trends that most investors don’t recognize until it's too late.

Preview the latest Financial Forecast now>>

Free 50-Page eBook


Learn to Think Independently

The Independent Investor eBook can help you to challenge conventional notions about investing and explain market behaviors that most people consider "inexplicable."
Download your free Independent Investor eBook


© 2014 Elliott Wave International

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.