U.S. Consumer Sentiment Bullish Despite Weak Industrial Output

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U.S. Consumer Sentiment Bullish Despite Weak Industrial Output

According to the University of Michigan’s consumer sentiment index, which “rose to 92.1 in early October from a reading of 87.2 in September”, the U.S. economy could benefit from a “4 percent annualized rate of consumer spending growth” if this bullish behavior endures throughout 2015.

Considering the disappointing impacts of a strong dollar on earnings, general stock market volatility, and underinvestment in capital markets dependable growth in consumer spending, which accounts for a majority share of U.S. economic activity, by some estimates two-thirds, is essential to further stabilize and contribute to the post-Great Recession recovery.

Production of industrials, however, was relatively weak with a marginal annual rate of “1.8 percent” as measured in the third quarter. Consequently trade, retail sales, and employment were adversely impacted as was mining, computer and electronic goods, and manufacturing output. Though, manufacturing news was a not total disappointment as a byproduct for an increase demand in autos “lifted motor vehicle and parts production by 0.2 percent.” According to economist Jesse Hurwitz of Barclays in New York, he contends an expansive contraction in aggregate growth is unlikely since “service sector activity remains solid.”

Although the Fed has communicated a strong desire to normalize its monetary policy with respect to the federal funds rate, it appears sluggish economic growth and low inflation, among other factors, will delay this inevitable action. Recently the FOMC “reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate.” Surprisingly, given the aforementioned, consumers remain positive about their financial future in the short term. In fact, Lucia Mutikani argues “consumers were the most optimistic about their personal financial expectations since 2007.” In summary, looking forward the quality and quantity of consumer sentiment is a critically important focal point in the monitoring of the America’s post-recession recovery and general economic health.

Author

Edmund Burden

I help business owners grow their businesses through effective use of financial technology tools. Personal finance is a passion of mine so I try to stay on top of all the trends and write about where I see the market going.

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