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Has Consumer Sentiment Rebounded, as Gas Prices Fall Back?

Here in Chicago, gas prices have fallen just over 25% from their summertime peak - at over $4.50/gallon of regular gasoline in parts of the city last July.  In other parts of the U.S., where local and county gas taxes are not as oppressive, gas has fallen way south of $3.00 per gallon!

How has this affected Consumer Sentiment in general?  Do folks have a more optimistic outlook about the economy?  The housing market?

No, unfortunately - 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.  (Today, a barrel of crude comes in around $70!)

But today, 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."

See our post today at BlogChicagoHomes.comfor more info, as well as a link to Kelly Evans' post in the Real Time Economics Blog via The Wall Street Journal, from last Friday, October 17th.

DEAN & DEAN'S TEAM CHICAGO

Comment balloon 9 commentsDean Moss • October 19 2008 11:33PM
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