October 31, 2011
By Dees Stribling, Contributing Editor
The Reuters/University of Michigan’s consumer-sentiment index saw an uptick in late October, ending the month at 60.9. That number compares to 57.5 — in mid-October and September — as well as August levels that were even lower, since consumers were befuddled by the economic shocks of the summer.
The improvement the last two weeks was driven by the leading component of expectations, which was up 4.8 points to 51.8. The current conditions component also increased, though more modestly, up 1.3 points to 75.1. Consumers are still expecting some inflation: 3.2 percent for the next 12 months and 2.7 percent for the next five years.
The uptick in sentiment mirrors some of the other relatively good news about the economy recently, such as the increase in both GDP (2.5 percent for the third quarter) and consumer spending, as well as the fact that Europe doesn’t seem to be flying off the rails for now. Still, the sentiment index still has a considerable ways to go before reaching the levels of the more optimistic days of spring 2010 and spring 2011 (between 70 and 75 most months), both of which were derailed by mini-economic panics that have stunted the recovery.
U.S. Incomes Up Slightly in September, Savings Down
Consumers might have been spending more in September, but it wasn’t because they’ve been making that much more. According to the Bureau of Economic Analysis on Friday, personal income increased $17.3 billion, or 0.1 percent, and disposable personal income — the kind you can go out and have fun with — increased $12.9 billion, or 0.1 percent, in September. A meager amount, but at least it was better than during August, when income was down $13.6 billion, or 0.1 percent, while disposal income decreased $12.8 billion, or 0.1 percent.
Since spending was up in September more than income for most American workers, it stands to reason that the U.S. savings rate was down for the month. Sure enough, the BEA also reported on Friday that personal savings totaled $419.8 billion in September, compared with $479.1 billion in August. Personal savings as a percentage of disposable personal income was 3.6 percent in September, compared with 4.1 percent in August.
In fact, the savings rate is now the lowest since December 2007, which was technically the first month of the Great Recession. Then again, it could be argued that now is a lousy time to save, since interest rates are essentially zero and the cost of borrowing not much more, and so in some ways consumers are responding rationally to the current environment.
Truck Tonnage Gains Compared With 2010
A less-noticed but somewhat optimistic index was released by the American Trucking Associations on Friday, which said that truck tonnage — that is, how much stuff trucks haul around the country — fell 0.2 percent in August from July, but was up 5.2 percent year-over-year in August. That could be another indication that the double-dip recession isn’t in the cards this year.
“Freight has been going sideways for much of this year, but it isn’t falling significantly either, which suggests the U.S. economy just might skirt another recession,” ATA chief economist Bob Costello said in a statement.
Wall Street gyrated quite a bit on Friday, and eventually ended the day mixed. The Dow Jones Industrial Average gained 22.56 points, or 0.18 percent, while the S&P 500 was up a scant 0.04 percent. The Nasdaq barely moved as well, ending down 0.05 percent.