AS GAS PRICES TUMBLE - Has Consumer Sentiment Buoyed?
CHICAGO GAS PRICES FALL BELOW $3.40/GALLON, FROM OVER $4.50/GALLON SUMMER HIGH! NATIONWIDE, CONSUMERS SILL WARY, HOWEVER!
In Chicago, and across the U.S., the average price for a gallon of gasoline has fallen - below $3.00 in many parts of the country, higher here due to the highest local and state gas taxes in the country.
But what of consumer sentiment? Has newly-regained fuel savings translated in to greater economic optimism in general?
Sadly, no - according to the latest University of Michigan/Reuters Consumer Sentiment Index published last week. The index plunged this past month by 12.8 points - the largest fall in the index's 50-Plus Year history. The current index stands at 57.5, erasing recent gains over the previous two months, and nearly eclipsing the historic low in the Consumer Sentiment Index.
In September, as gas prices began to fall quickly when the price of a barrel of crude oil tumbled from its summertime, over-$147/barrel high, to below $100, the Consumer Sentiment Index stood at 70.3. But this month, consumers have become extremely concerned about reduced access to most credit, potential loss of their jobs, and shrinking values of their personal and retirement assets.
The downturn leaves many economist fearing a major decline in Consumer Spending during the critical Third and Fourth Quarters, 2008. Many have predicted the largest spending fall off in 28 years.
According to Joshua Shapiro, Chief U.S. Economist at MFR, Inc., “There exists a real possibility of a sharp drop in spending, perhaps even something akin to the collapse that ensued just after President Carter ordered credit controls to be implemented on March 14, 1980. In that episode, real consumer spending fell at an 8.8% quarter-to-quarter annualized rate in the second quarter of that year and real GDP fell at a 7.8% rate.”
For more, read Kelly Evans' post in the Real Time Economics Blog via The Wall Street Journal, from last Friday, October 17th.
DEAN MOSS & DEAN'S TEAM CHICAGO
