US Consumer Sentiment and Reality

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July saw consumer confidence in the US at an-all high level, not seen since 2008. Some believed that to be a telling sign that consumer sentiment had gotten its head around the recovery and it was actually going to happen. This month, analysts had predicted a rise to 85.5 and it seemed like the only way was up. But, newly released figures show that consumer confidence fell in August 2013 to 80.

It’s a telling tale when consumer confidence goes down in a country that is a warning signal that the government might be able to publish as many figures as they like; but there is a decided lack of trust in what is going on in the economy.

Firstly, there are the problems related to unemployment and which are closely connected to Quantitative Easing. The Federal Reserve has said that unemployment is a priority and that it should be brought down to below 6%. Tapering will begin in a few months and that is worrying the consumer, not just the markets.

The second problem that is related to consumer confidence is that the mortgage rates are increasing. The housing market had started to take off a little. But, this month saw a lower-than-expected increase in housing starts and permits. Interest rates are way over what they were last year. This is coupled with increases in housing prices. Not only will fewer people be able to borrow, but houses are more expensive and those that will borrow will be granted an average of $24, 000 less today.

The full article can be read here at ToTheTick:

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