A Consumer Bust…or Worse?
Last week I wrote that we are experiencing a “Consumer Bust”. Consumer spending is slowing, and we are facing the after-effects of decades of immoderate consumption. And that reality has taken its toll: consumer sentiment had fallen to the lowest level since 2009.
But now it looks worse.
Last Friday, consumer sentiment dropped to the lowest level in over 30 years (the Reuters/University of Michigan consumer sentiment index fell to a reading of 54.9 for this month).
This is the worst consumer sentiment has been since May 1980. And back then, the consumer had a lot to worry about.
We had just been through the OPEC oil embargo of the mid-1970’s (during which the price of a barrel of oil quadrupled), which led to an oil crisis that, combined with a devaluation of the dollar, posed serious risks to the economy.
And by early 1980, we were faced with a recession, and 14.8% inflation. By 1982 unemployment was 10.8%.
Today the numbers are different, but obviously, the uneasiness is the same. Consumer spending is the underpinning of our economy, and accounts for two-thirds of growth. And if last week’s report is any indication, this consumer bust looks more like a consumer crash.