Two For The Price Of One!?
Christian Science Monitor
US consumer sentiment rises (but it’s really stalling)
American consumers’ mood brightened in June, according to a new report, but the improvement was slight, mirroring the economy’s own sluggishness.
Consumer sentiment, as measured by Reuters/University of Michigan, rose to 69 in June, its fourth monthly rise in a row and its highest level since September. As consumer mood swings go, the closely watched index suggests that Americans are a third of the way back from their plunge to pessimism between January 2007 to November 2008, when the index hit its low of 55.3.
But now that swing toward optimism looks to be losing momentum. June’s 69 was barely above May’s 68.7 and not that much improved from April’s 65.1.
“While above its November low, this measure of consumer sentiment nonetheless remains severely depressed,” wrote MFR economist Joshua Shapiro in an analysis Friday. “This is hardly surprising in view of all the headwinds facing the consumer, none of which are likely to abate anytime soon.”
That’s the big question mark for the economy, too. If all that’s happening is a weakening of the recession, what will actually push the economy forward? Ominously, the survey’s index of consumers’ expectations about the future fell for the first time in four months, pointed out Paul Dales of Toronto-based Capital Economics.
“We fear that the rise in gasoline prices and the prospect of more falls in employment and incomes mean that households will need to further curtail their spending,” he wrote in an analysis. “The danger is that confidence might already be suffering a double-dip.”
MSNBC
Banking system still faces rough road ahead
Rising unemployment, falling house prices continue to stress lenders
News that 10 big banks will repay $68 billion in government bailout funds is being hailed as a key milestone on the road to a recovery for the battered banking system. But despite clear signs of improvement, the road is still full of potential potholes...
...with unemployment rising and home prices falling, it’s not clear whether the stress test was stressful enough. Assumptions about the “worst case” economic scenario - made when the test was designed in February - turned out to be too optimistic, according to Elizabeth Warren, head of the Congressional Oversight Panel set up to oversee the bank bailout...
Vancouver Sun
Economics is as simple as ABC -- er, make that V, W, U or even L
Talk has shifted from green shoots to a double-dip and the latter has nothing to do with ice cream.
Many economists now expect the economy will not bottom out and rebound, in the classic V shape, but will recover somewhat only to slide again, more like the pattern of a W...
The increased cost of capital, or the lack of it, will smother the green shoots stimulus spending spawned and the economy will sink back into recession.
At the same time, analysts fear U.S. consumers, who have suffered the largest drop in household wealth in history, will save rather than spend and, while that may sound virtuous, prolong the economic pain because consumer spending accounts for more than two-thirds of the U.S. economy.
In the absence of consumer demand, there will be no economic growth, weak corporate earnings (if any) and mounting job losses, leading to further erosion of consumer confidence...
Globe & Mail
Green shoots? How about a ‘double dip'
Does the Great Recession come to an end with a classic recovery and a smooth return to good times? Or does it imitate the false starts that confounded the 1930s and Japan in the 1990s?
Economic indicators pointing toward a recovery have mounted in recent weeks, and better-than-expected U.S. job numbers released Friday strengthened the view among investors that recovery is around the corner.
But a growing camp of analysts and policy makers is highlighting the risk of the so-called double dip. They argue that the recent improvement in economic indicators is undeniable, but is also a one-time bounce from rock-bottom lows and is more likely to produce a growth profile that looks like a W rather than the more benign V or U. The turnaround won't be sustained, they argue, especially after fiscal stimulus wears thin and interest rates rise. At the heart of the double-dip scenario is the American consumer. U.S. households have experienced an unprecedented destruction of their wealth over the past two years, and are ill-prepared to face any more challenges, be they rising mortgage rates, an end to stimulus spending, persistent unemployment, or higher central bank rates. Last week, new U.S. data showed consumer borrowing had its second-largest drop on record in April, falling at a 7.4-per-cent annual rate. Meanwhile, savings climbed to 5.7 per cent of disposable income, the highest rate since early 1995.
“I think the double-dip scenario, in my opinion, is as close to a certainty as you can come,” says David Rosenberg, the high-profile former chief U.S. economist at Merrill Lynch, and now at Gluskin Sheff in Toronto...
This Post's Antidote du Jour*
*Concept shamelessly borrowed from Naked Capitalism, of course