Consumers cheer up as economy improves
The University of Michigan Consumer Sentiment Survey for June is released Friday, June 12, and the consensus among economists is that it will start trending up again after a dip in May. Retail sales in May were up by 1.2 percent (1.0 percent after taking out auto sales), indicating a strong consumer rebound in mid-spring after the economy slowed sharply in the winter.
A major factor driving consumer sentiment is employment, and job-creation has been consistently strong recently. Wages have started rising, too, says Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “People are employed, people’s houses are selling, and I think people are not worried about what markets are doing and they’re not worried about their neighbor losing their job,” says Cox.
Cox says many of the people he advises on investments and financial planning are renovating houses, buying new cars, and going on nice vacations for the first time in years.
Retail analyst David Schick at the investment bank Stifel Nicolaus says American consumers have become more confident and willing to spend as the recession has receded into the past. But he says there are still plenty of scars. “We’re not so far removed from the financial crisis,” says Schick. “We have many new college grads whose spending attitudes were forged during a time when consumers had to be quite careful.”
Shick says earlier in the recovery, the wealthiest consumers led the growth in retail sales. Their assets and income rebounded more strongly and more quickly than people lower on the economic ladder. But Schick says now, lower- and middle-income people are driving retail growth as jobs return and wages rise.
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