Americans’ urge to shop is overriding anxiety about the economy.
While household-sentiment measures are at levels typically observed during a recession, an increase in spending during the third quarter boosted growth to the highest level of the year, Commerce Department figures showed Oct. 27. The schism partly reflects consumer ire with the government’s failure to reduce 9.1 percent unemployment or stem rising deficits, said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management.
“Emotionally based indicators are suspect,” Paulsen said. “There is a lot of anger out there. In a calmer time, these indicators might provide a better guide. Consumers are scared to death, but they are still spending.”
Consumption has tracked sentiment about 75 percent of the time in the past 25 years, Deutsche Bank estimated in an Oct. 25 report. Periods when the confidence measures proved unreliable include the aftermath of the 1990-91 and 2001 recessions, the bank’s report and Paulsen said. The most recent recession lasted 18 months and ended in June 2009.
