US consumer sentiment confirms Boom/Gloom Index weakness

Economic growth

SHARE THIS STORY

Index Jun13.pngIt is now 4 years since the blog launched its IeC Boom/Gloom Index, as a way of measuring the difference between sentiment and economic reality. Its purpose then was as follows:

“Markets are driven by two factors, sentiment and fundamentals:

• Fundamentals can be followed by analysing hard data. In chemical markets, for example, key areas include new housing starts, auto sales, industrial production, Asian exports, etc. This data can also be used to make forward projections
• However, sentiment is equally important, as it tells us what markets think is going to happen next. Sentiment can often contradict fundamentally-based forecasts. Usually it involves financial players, often using price charts to time their entry and departure”

Since its launch, an entirely new effect has been seen, namely the concerted effort by central banks to manipulate financial markets higher via their liquidity programmes (orange arrow). They mistakenly believe, as Ben Bernanke wrote in January 2011, that this will provide the so-called ‘escape velocity’ needed to stimulate a recovery in consumer spending.

US consum confidMay13.pngIn actual fact, as this month’s Index shows, sentiment (blue column) has remained fairly weak. It has failed to follow the S&P 500 Index (red line) higher. This is confirmed by the second chart from Barron’s, showing developments in US consumer confidence since 1977, as measured by the Conference Board.

It highlights how the current recovery has only taken confidence back to levels previously seen at recession bottoms (green line). Whilst May’s figure of 76 sounds positive to those who assume it is a percentage, it is just half of the peak seen in the late 1990’s – when all the BabyBoomers were in their peak spending years.

Household consumption is 71% of US GDP. One day, people will look back and be amazed that policymakers continued to ignore the impact of demographics on the economy, despite evidence such as this.

PREVIOUS POST

Pimco warns on "negative impacts" of central bank policiy

17/06/2013

A new report from Pimco, the world’s largest bond fund manager, makes it c...

Learn more
NEXT POST

US PVC exports stall, despite shale gas cost advantage

19/06/2013

You can lead a horse to water, but you can’t make her drink. That seems to...

Learn more
More posts
Merkel warns of need to prepare for No Deal Brexit
05/07/2020

Most people missed the fact that last Tuesday was the last possible date to delay the UK’s exi...

Read
World moves from Denial to Anger, as the Paradigm of Loss moves forward
07/06/2020

I have been warning about the Covid-19 risk since early February, and in April suggested here that: ...

Read
The New Normal for global industry
31/05/2020

The global chemical industry is the third largest sector in the world behind agriculture and energy,...

Read
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read
Local supply chains replace global trade as world starts to “do more with less”
26/04/2020

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Read
Financial markets enter their Convulsion phase
19/04/2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

Read
World risks moving from Denial into Anger as the Paradigm of Loss moves forward
12/04/2020

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more
X

Uncover exclusive industry upates from ICIS

Interested to uncover more articles related to this topic? Explore additional news, insights and intelligence, tailored to the markets you are interested in by accessing exclusive content from ICIS.com

DISCOVER MORE