Consumer sentiment sparks economic confusion

A revised index sinks stocks while shedding light on lingering insecurity.

By Jason Notte Oct 26, 2012 1:51PM

How to you go from a consumer comeback to outright calamity in two weeks? Revise consumer sentiment numbers by half a point.

The final University of Michigan/Thompson Reuters (TRI) Consumer Sentiment Index for October, released Friday, stood at 82.6, which is still its highest level since September 2007. At the same time, gross domestic product -- the big-picture measurement of the nation's economic activity -- rose 2% in the third quarter behind government spending.

That sounds like good news, unless you're an economist who saw the Consumer Sentiment Index's preliminary 83.1 score two weeks ago and decided that's where the nation should be. When the index fell short of that expectation Friday morning, stocks fell right along with it.

What's changed in two weeks other than the points? It depends on whom you ask. The Commerce Department says consumer purchases rose 2% in the third quarter after a 1.5% gain in the three months before, but that was all prior to October. The unemployment rate fell from 8.1% to 7.8% and added 873,000 jobs to the rolls in September -- the highest tally in nine years -- before the preliminary numbers were released. Car sales rose 9.3% in September, and consumer spending overall was up 1.1%, according to the Census Bureau.

The economy even received some good news in the past two weeks. Average gasoline prices have dropped more than 25 cents per gallon since peaking at $3.83 during the week of Sept. 17, according to the Energy Information Administration. The National Association of Realtors reported an 11% increase in existing home sales in September over the same time last year and an 11.3% bump in existing home prices. Meanwhile, the National Association of Home Builders says new housing starts were up nearly 35% in September from the same month last year and are the healthiest they've been since July 2008.

Recent reports have been a bit more troublesome. Investors and analysts got awfully jittery after Apple (AAPL) missed earnings expectations in the third quarter. The same day, Amazon (AMZN) not only reported its first loss in nine years, but offered up a forecast for the fourth quarter that didn't instill much confidence. Meanwhile, layoffs at DuPont (DD), Zynga (ZNGA) and elsewhere have given employees and economists fresh cause for concern. Not that they didn't have enough to worry about with the upcoming election and the looming "fiscal cliff."

Americans should be cynically resigned to this sort of thing by now. The Consumer Sentiment Index is the embodiment of the current economy, where every small triumph is tempered by a sense of dread and every step forward is made in fear that the next stride will send everything tumbling over the edge. If the Consumer Sentiment Index isn't offering any firm indications on where the economy or spending is headed, it's likely because consumers just don't know.

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Oct 26, 2012 3:31PM
What happend to all the tax cuts from Bush and the congress that was to create jobs? What happened to all the stimulus that was to create jobs ? Wall street and the private sector has failed America in creating jobs !( The government does not create jobs, the private sector does) with all the free money from the FEDs on wall street < they have failed the biggest ! Tax cuts for over a decade across this whole country ? The devaluation of our homes to the tune of 60-70% Across this nation ? Congress ?? POTUS ?? Well the US Congress is on a 5 week vacation , and there are two people running for POTUS. Now i have yet to see a single job created by Romney? Ryan has been in congress for yrs , and he like the whole place are the problem < he said he has( Romney creating jobs)? WHERE ? I have yet to see the debt cut in half like Obama said , or the ending of the war ? < But then CONGRESS tax and spends and makes the laws !( Its in the US Constitution) ! The US Supreme Court ruled that money is free speech and corporations are people ? I have read the Constitution and never seen that ? We have Wars , debt,gridlock in Congress , Wall street and the private sector creating( NO JOBs at all) !! If America thinks Obama can fix it ? Or Romney can fix it ? LMFAO the jokes on you because only the US Congress can fix this and they are the best money can buy And as useless as they come .The clowns on the left (D) , or the jokers on the right (R). Any QUESTIONS ? lol What a mess.
Oct 26, 2012 2:11PM
Hopefully, President Romney will do a much better job than Obama has done.  America has been stagnating along and stuck in mediocrity under Obama.  The liberal media like to report every little random improvement in economic data as evidence that Obama is supposedly working miracles (and working miracles with statism of all things!).  But then a month or two passes, and everyone is re-reminded that the stagnation continues and that, under Obama, no real recovery is anywhere in sight.
Oct 26, 2012 3:03PM
Consumer Confidence is in the TOILET ! But the Spin MASTERS will spew more "B" to the masses ! Happy Holidays to FRAUD STREET and the (TBTF) BANKING CARTEL !
Oct 27, 2012 11:58AM

With the Dow up 61% with Obama and 31 straight months of job growth, this one great

President.If Obama was white and a Republican these nasty, bitter Republicans would

absolutely singing the praises of the president, but negative far right remains in denial.

I would hear nothing but praise for Obama on these sites.Let`s not forget he`s got us out

of one war and on the way out of another.Bin Laden is dead and Gm is alive.It`s time for

petty politics to disappear and the bellyacking to stop and support our fine Presidend who`s

earned our respect.Stop the pettiness and respect our fine President.

Oct 27, 2012 5:37PM

Romney keeps saying "goverment doesn`t create jobs:Then in the next sentense

he says "when I`m head of the government we`ll create 12 million jobs"Why don`t

people realize what a liar he is?

Oct 27, 2012 5:43PM

I keep hearing from these Republicans that the GOP should be running Washington.Well,

I`ve asked several times here what did GWB accomplish that would merit the GOP

getting another shot.Nobody comes forward with GWB`s accomplishments.Let`s hear

some.McCain just said "elect me and I will serve"Running down Obama isn`t an answer.

Oct 27, 2012 10:58AM
Crown psychology moves in waves. Optimism causes economic expansion, pessimism causes economic contraction. But sometimes our hand is forced. This is one of those times. Today's economic problems are not about what we are doing today. But they are about what we have already done. Google CONQUER THE CRASH KONDRATIEFF WAVE to understand why. 
For many decades, FED made credit easy, America borrowed. We have inflated the money supply, prices and salaries with borrowed money. Debt has reached excessive levels with FED's leadership. FDIC guaranteed deposits and depositors never questioned bank actions. Fannie, Freddie guaranteed mortgages, banks gave mortgage to every breathing soul. The mistakes are already made. The cause is in place. The effect will follow. 
Oct 28, 2012 5:06PM

Prices are going up, food etc.  25 million outa work. 

when the govt quits buying all the equipment for the afghan war then the defense stocks will drop, and defense companies will lay off.  then it goes out into the economy and it will bloom into the second half of the recession.


Wheres all the jobs Ovomit promised in green energy.  all i have seen are two companies that took tarp money and bankrupted. Green energy is expensive.  the govt is borrowing money now. 


As a side example cars were invented in 1886.  they did not take off until 1950.  thats 64 years.  How long has green energy been around?  It takes a while to move from one to the other.


OTOH, we need jobs and that can be created by using coal and oil.  That we have got.  then when there are enough jobs move toward green energy. 


there are things we can do.  Ovomit is borrowing us into a hole we cant get out of.  If the people in the US that make 1 million dollars a year or more were taxed $250,000 each, the 22 trillion we are soon to have would take 285 years to pay off and thats not including interest. 


the second half of the depression is coming.  about 2014-15.  who do you want to make the decision on the massive cuts that are coming.  A community coordinator and failed president or a former businessman.   maybe its time for a bean counter. 

Until the people of the US can come to a compromise on the issues we face, will will keep jumping back and forth.  We elect one and he plays with his brain and we throw him out and elect another.  Hopefully one of these years we will get some leaders in washington.  Until then we will jump back and forth between liberal and conservative policies. 

Oct 26, 2012 4:30PM

Appl selling out of all products before they come off the assembly, yet stock goes down.

Its called backward economics from stock forcasters that failed economics 101.  Appl should be at 1000.  So it missed by 1ess than a dime, what are they crazy.  Cookie paint the black mini ipads white and sell those out to.  Why not another color like pink or blue and see if those mini ipads sell out.  After selling 1000 billion at 800% profit maybe stock analysts will come to their senses duh.

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