Recession Tightens for All but the Very Rich
Posted: June 20, 2009
The Consumer Balance Index (CBI) declines six points from 82 in June to 76 in July, extending the prior month’s three-point loss from 85 in May to 82 in June.
The nine-point loss in the CBI between May and July wipes out the nine-point gain achieved between 76 in February and 85 in June.
While the broad majority of consumers experienced a tightening of the recession, the minority of consumers with the highest per capita incomes experienced an easing of the recession.
For upper class consumers, as defined by per capita income, the CBI increased by three points from 78 in June to 81 in July. For the middle, working and poverty classes, the CBI decreased between June and July.
METHODOLOGICAL NOTE: The CBI tracks consumer appraisal of their financial balances – assets and income versus debt and spending – which influences their decisions to increase, decrease or maintain their current rate of spending. As such, the CBI serves as a indirect, co-incident indicator of the level of economic activity.
Using data available for individual consumers, the level of economic activity can be estimated not only for the NATION but also for SEPARATE segments of the consumer population delineated on the basis of specific characteristics such as per capita income, gender, race, age and the like.
STOCK PRICES: In June, the roughly 45% of consumers who own common stock or mutual funds and invest in common stocks turned negative in their view of future stock prices. The ratio of prospective buyers of stock in the event of a 10% decline in the Dow declines from 1.34 buyers per seller in June to only 0.65 buyers per seller in July.
PRESIDENT OBAMA’S PERFORMANCE IN OFFICE: The percent of Americans pleased with President Obama’s performance declines seven points from 62% in June to 55% in July.
INTRACTABILITY OF THE NATION’S PROBLEMS: More Americans in July (45%) than in June (37%) believe that the problems facing the nation are so severe that they cannot be solved no matter who is president.
COMMENT: Improvement in the financial balances of Upper Class consumers promise further “green shoots” and “glimmers of hope” that President Obama and Fed Chairman Bernanke talked about as signaling an end to the recession.
Conversely, decreases in the financial balances of the broad majority of the population can cause the “bumps in the road” and the “perils that confront the economy” that Obama and Bernanke also talk about.
Going forward, 8Sages.com will post reports on the CBI monthly. The August report will be posted on or shortly after August 21.
TO ASK QUESTIONS, make suggestions or offer your projections of the future, phone Leo J. Shapiro, CEO, SAGE: Survival and Growth Enterprises LLC. He can be reached in Tucson at 520.878.0188
Copyright July 2009 by Leo J. Shapiro – All Rights Reserved.