Menu
Share
Share this story
Close X
 
Switch to Desktop Site

Consumer sentiment: Will Americans spend or save?

(Read article summary)

Phil Coale/AP/File

(Read caption) A shopper walked past a store advertising clearance sales in January in Tallahassee, Fla. Retail sales unexpectedly rose in February, but consumer sentiment fell in March, according to reports released Friday.

About these ads

US consumers are acting a little quirky these days.

On the one hand, they're spending more than expected.The latest evidence comes from February retail sales (minus autos) jumping a surprising 0.8 percent, according to a Commerce Department report released Friday.

On the other hand, consumers say that things are bad and they're losing confidence that they'll get better, according to the March sentiment survey released Friday by the Thomson Reuters/University of Michigan's Surveys of Consumers.

So who's right: Consumer Jekyll or Consumer Hyde?

To some extent, that depends on what happens with the econcomy. If the US can begin to create lots of jobs and pare the unemployment rate, more Americans will start receiving paychecks. They'll spend their money.

By contrast, if the economic recovery is anemic, then consumers could hunker down for the long term.

There are reasons, beyond the jobs numbers, for consumers to burrow in. During the housing bubble, they stopped saving and used debt to boost their share of the economy from about 63 percent to almost 71 percent, points out Joshua Shapiro, an economist with MFR Inc., in a written analysis. Now, they'll have to pare back, urged on by a credit crunch, a loss of housing wealth, and the fading effect of the federal stimulus.

Other economists are similarly pessimistic.

"Overall, it is hard to see a sustained acceleration in consumption growth while households remain so downbeat," writes Paul Dales, an economist with Capital Economics, in an analysis.

But not everyone is so gloomy. This isn't the first time that what consumers do has contradicted what they say.

"Today's [retail sales] data suggest that real consumer spending will rise about 3 percent in the first quarter, the fastest increase in three years," writes Nigel Gault, an economist at IHS Global Insight, in an analysis. "The figures suggest that consumers are feeling more confident in the outlook."


Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.

Loading...