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September 17, 2005
Consumer Sentiment Throws A Funeral, In Full Color
We already know it wasn't pretty, but the picture from yesterday's University of Michigan consumer sentiment survey is still pretty shocking. Here's how the inflation expectations cookie crumbled:
You, of course, have already noticed that there is a similar dramatic spike in the not too distant past (in the opposite direction). And you have probably guessed that the date is associated with September 11, 2001.
I'm not sure I needed two data points to know that disasters tend to make people pessimistic, but if I did, I have them now. Here's hoping these expectations settle down as quickly as they did the last time.
UPDATE: Several eagle-eyed readers noted that the expectations data in the picture above does not quite match the numbers reported in the press and in my previous post on the subject. Good catch. The explanation is pretty simple: The picture above is based on the average response in the survey, while most other reports were based on the median response. To be perfectly honest, the median is often the better thing to look at, as it controls for outliers. It is also the one that corresponds to what we generally refer to as the "consensus." Thanks to the quick-on-the-draw Linsey Malloy, here is the analogous picture for median expectations:
FINAL UPDATE: For the permanent record, here are the final results:
September 17, 2005 in Data Releases, Inflation | Permalink
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Comments
Posted by:
The Nattering Naybob |
September 18, 2005 at 05:33 AM
NN -- I certainly agree that there has not been a lot great news of late. I can't say that its too surprising in light of the energy price developments of the past month. And, although I think the very worst of the immediate fears in the days following Katrina look to be passing, with history as a guide one would be declined to predict some drag on the economy and pass-through to those core inflation numbers that have been pretty helpful so far. It's a tough time to be making monetary policy (about which I cannot much comment, for obvious reasons). I will say that the feeling to me is a little like last spring, when the last "soft patch" hit. Of course this round the shocks look a little bigger, the funds rate is higher, and there are some signs that the housing situation is cooling. But I'm still holding out hope that we will see a bounce back like we saw through most of the summer.
Posted by:
Dave Altig |
September 18, 2005 at 07:07 AM
Dave,
Last week, mixed retail sales reports, 2 weeks ago a massive consumer credit downturn, this week downturns in Philly Fed and UMCC.
Taken together this data indicates an oil price shock latency which is starting to effect the economy.
Comments from a neighbor or the average American Joe: "just feeding 2 kids and 2 adults is costing over $150 a week with nothing special on the menu."
"Everything at the stores has gone up at least 10% and at $3 a gallon they are really bending us over and f__king us royally at the gas pumps."
Of course the current CPI was "in line" +0.5 and indicated "tame" core inflation +0.1 for the 4th straight month.
With oil spiking into the $60 - $70 range during this period, I find this absolutely IMPOSSIBLE and quite unbelievable.
Now add the fallout from Katrina, I am waiting to see if the next 2 CPI and PPI reports reflect appropriate levels of inflation being passed through the supply chain, core included.
Gold up to $455 sez someone thinks the Fed will pause. Or do they have less faith in equities and bonds going forward?
Me thinks, bond prices falling sez bond investors are waiting for higher rates, or they think no pause and further inflation going forward.
I believe the Fed keeps raising to target the asset bubbles sans pause, yield curve be dammed. Thoughts?