Instant View: Consumer sentiment tumbles in July

NEW YORK (BestGrowthStock) – U.S. consumer sentiment weakened in early July to its lowest in 11 months on a resurgence in fears about the economy, a year since the recovery began, a private survey released on Friday showed.

KEY POINTS: * The reversal in consumer sentiment was dramatic after it reached its strongest level in nearly 2-1/2 years last month on hopes of better job and credit conditions, according to Thomson Reuters/University of Michigan’s Surveys of Consumers. * The survey’s preliminary July reading on the overall index on consumer sentiment plummeted to 66.5 from 76.0 in June. The figure was below the median forecast of 74.5 among economists polled by Reuters.

COMMENTS:

LEE OLVER, MANAGING DIRECTOR, MADISON WILLIAMS & CO., HOUSTON:

“Certainly stocks are in for a rough patch given the weak economic numbers including today’s confidence number.

“Even the news has been positive for bonds, the move hasn’t

been strong. We are already so low in yields. We need much more bad news like a negative private payroll number for us to break below 2.88 percent in the 10-year yield.

“As for double-dip recession, the economy won’t probably contract again in consecutive quarter, but clearly growth is slowing down.

“Deflation meaning a generalized drop in prices is looking more likely, but is it really going to make it? I have my doubts. Core prices have edged up. Still inflation certainly doesn’t seem like an issue.

“Will the Fed embark on more quantitative easing? Probably not because they think growth will continue. And they have expressed doubts the effectiveness of buying MBS to lower mortgage rates. Rates are not a problem in the housing industry right now. The problems are credit availability and borrowers’ reluctance to take on new debt and the inability of owners to sell their current homes.”

GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST.

LOUIS, MISSOURI:

“It shows that consumers are still very concerned about the state of the economy. We’re better off than we were a year ago in many areas, but consumers don’t feel it that much. So they’re not too optimistic about the future or upbeat about the present. It’s natural that people want things to get better fast and it just takes time to heal. I don’t think this means the economy is in trouble. It just means that we’re probably due for a pause before the economy gets its second wind.”

STEPHEN CARL, HEAD OF U.S. EQUITY TRADING, THE WILLIAMS CAPITAL

GROUP LP, NEW YORK:

“Consumer sentiment is not good. A lot lower than estimates, a lot lower than prior. The (stock) market opened lower, and this is kind of (helping to set) the tone. It’s a summer Friday; we’re going to be keying in on some of the earnings, and it probably is going to be a down day.”

DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:

“The numbers are pretty awful. We were looking for a significant decline, in part because Michigan had outperformed other surveys in June — it really was due for a fall, but the scale of this decline is actually quite startling.

“It suggests that the consumer has noticed the deterioration in the economic outlook. There are a lot of factors coming into play including the Europe situation and weakness in U.S. equities. But still the economy does seem to be slowing with the government stimulus starting to fade.

“I wouldn’t rule out a double dip, but the economy probably is still going to grow but we are probably going to see a weak third quarter.”

WILLIAM LARKIN, PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT,

SALEM, MASSACHUSETTS:

(The consumer sentiment data) “adds credibility to the double dip (view) and I think that’s what happening right now. It’s the tail end of these recessionary pressures.”

“Treasuries are rallying on the news.”

MARKET REACTION: STOCKS: U.S. stock index futures extend losses BONDS: U.S. Treasury debt prices extend gains DOLLAR: U.S. dollar extends losses versus yen

Instant View: Consumer sentiment tumbles in July