Saturday, 19 March 2005

Consumer sentiment falls again in March

The University of Michigan index of consumer sentiment fell to 92.9 in March from 94.1 in February. It is the third straight month that the index has fallen.

In spite of this deterioration, Richard Berner at Morgan Stanley thinks that US consumption will remain resilient.

[A]s I see it, apart from the energy hurdle, key fundamentals are slowly turning more positive for the consumer. Hefty tax refunds are a short-term offset to the incipient energy "tax." Balance sheets for most households are gradually improving, and the typical consumer is less vulnerable to rising interest rates than is commonly thought. Most important, strengthening job and income growth likely is lifting spending wherewithal, especially for lower-income consumers. The result: Solid, if unspectacular growth is likely for now.

Betting against the US consumer has not been a good idea over the past few years. Will this time be different?

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