The Disconnect Between Consumer Confidence and Retail Sales
Two statistics released on Friday highlight the growing disconnect between what the average man (or woman) on the street is seeing and what the economic data appear to be telling us.
On the one hand, those who believe the economy is on the road to recovery -- albeit more slowly than many would hope -- will point to the latest data on consumer spending as a sign that things are still on track. While adjusted retail sales rose a slightly lower-than-expected 0.4% last month, the year-on-year gain was a healthy 5.5%, the ninth straight monthly increase.
Pessimists, meanwhile, might note that the most recent report on consumer sentiment from the University of Michigan revealed that Americans remain concerned about the economic future. The headline index for July rose to 69.6, beating estimates. But that measure is below the 76.4 level seen in November 2007, just before the recession began, and more than 20% below its long-term median.
In fact, if you compare the two series going all the way back to when the Census Bureau first started reporting monthly retail sales, the recent divergence is striking.
The obvious question, of course, is: Which data give us a better sense of what's happening with the economy. Are consumer sentiment surveys like this one and others, including the polls published by the Conference Board and Gallup, painting an unrealistically dire picture of where things stand? Or are the "official" statistics on consumer spending giving us an artificially inflated reading on the consumer's pulse?
Given all the other evidence we've seen lately, including last week's dismal jobs data -- not to mention the fact that ordinary Americans have been ahead of the curve as far as the economy is concerned since before the financial crisis started -- one has to assume that it won't be long before we'll soon be seeing a different sort of pattern emerge in some of the official statistics.
Watch out below?