Recessions have a huge “sentiment” component in their causation. Consumers and CEOs look around at the economy, assess their feelings about the future economy, and decide that the prudent course is to cut back on spending to prepare for the coming economic downturn.
Which, of course, brings about the slowdown that they feared.
And which is, of course, why at a time like this when recession fears stalk the land, investors and traders are spending a lot of time scrutinizing all measures of sentiment.
Such as the survey of active homebuyers released by Realtor.com today that found 36% of 755 active homebuyers responding to the survey, expect the next recession to begin in 2020. That’s up from 30% in March. (On the plus side, 44% of respondents believe that the coming recession will be milder than the Great Recession 10 years ago.)
Or this Campaign 2020 Poll (my name, not theirs) from Quinnipiac that found 37% of respondents think the economy is getting worse. 31% say they continue to see improvement. (Please, I’ll have whatever they’re drinking.) Only 30% say the economy is staying about the same. That’s the lowest number on record in this poll. (On the positive side the economy continues to get a very high grade with 61% saying the economy is excellent or good. However that is down from a high of 71% in May.)
Yesterday the Conference Board’s Consumer Confidence Index for August showed a similar picture. At 135.1 for August the index was down from 135.8 in July. But that July level was the third highest reading since October 2000.
The Present Situation Index, which asks for consumer opinion on the current economy, moved up to 177.2 from 170.9.
The Expectations Index, which asks for consumer opinion on the future direction of the economy, slipped to 107.0 from 112.4.
I don’t see anything in all these “sentiment” numbers that says the economy is on the brink of a recession but the downward trend in sentiment about the future is troubling and something to watch in the future.