Consumer Sentiment Moves Off Of Highs:

Posted by Michael M on

English: Chart of the seasonal US unemployment...

Americans turned less optimistic about the economy in early February on worries about falling income even as their outlook on the jobs market rose to a record high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell back in February with a preliminary score of 72.5 that is 2.5 pts lower than January’s score of 75.

Current conditions, and more precisely a negative tone towards current finances, was the heaviest drag. Even though optimism towards the job market kept up, the CSI was unable to hang on to sentiment expressed last month. Market expectations averaged to 74.5.

The optimism in their job outlook is encouraging though and is certainly reflective of the steady string of better than expected Initial Weekly Jobless Claims and the recent decline in the national Unemployment Rate.  As these trends in lower Unemployment continue, look for the Consumer Sentiment to regain some ground.

What Happened to Rates Last Week?

Mortgage backed securities (MBS) lost -26 basis points from last Friday to the prior Friday which moved mortgage rates higher on a week-over-week basis.  That also marked a -68 basis point drop in MBS pricing from our all time high on 02/02/12.

Mortgage backed securities (and therefore mortgage rates) moved sideways during the week with only minor movements in reaction to the 10 year and 30 year U.S. Treasury auctions.  But MBS did sell off on Friday on news that Greece would come through with another austerity package that would qualify them for additional bailout funds.

The Greek story has been an important one for mortgage rates.  Mortgage rates are artificially too low due to increased demand for U.S. bonds as a pure “safety play” against a European financial collapse.  A default by Greece would start a “domino effect” of other countries defaults too.  So, any positive news that a default is postponed will cause our rates to increase.

Today? 

Fed Releases Orders Related to Banks in Mortgage Settlement

The Federal Reserve Board released today the orders related to the previously announced monetary sanctions against five banking organizations for unsafe and unsound processes and practices in residential mortgage loan servicing and processing. The Board reached an agreement in principle with these organizations for monetary sanctions totaling $766.5 million on February 9, 2012.
ABA: Statement on Proposed Bank Tax
“The banking industry strongly opposes the $61 billion bank tax included in President Obama’s budget proposal. Despite claims to the contrary, the facts on TARP are very clear: Taxpayers have profited $13 billion from their investments in banks through the program and Treasury predicts they will see a lifetime positive return of more than $20 billion. Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred.
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2 responses to “Consumer Sentiment Moves Off Of Highs:”

  1. Thanks Michael, this sounds great, but I sure would like to believe that the current trends in employment continue and wonder about three things.

    – Are the figures correct and fully figure for unemployed no longer reporting. I checked http://www.bls.gov/news.release/empsit.nr0.htm but I am no economist so it is hard for me to be sure what I am looking at and to my layman’s eyes, for the most part only limited categories of workers are covered by the decline.

    – What is driving the jobs market to unemployment numbers to decline?

    – Most Americans are over leveraged just like their houses. Even if many became employed or got raises; it would still take Americans awhile to dig themselves out of debt which will take us living within our means. This I have a hard time seeing.

    What I really see is; not unlike our countries deficit, but more importantly this countries debt; we are in a non sustainable hole we can not spend our way out of.

    Reply

  2. Pingback: Consumer Sentiment Best Levels in 4 Years: | MICHAEL MCDEVITT

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