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Doom and gloom mood puzzles economists

June 18, 2008 at 7:43 AM   |   Comments

NEW YORK, June 18 (UPI) -- Consumer sentiment appears more dire than the data that describes the U.S. economy would predict, economists said.

The last time consumer opinion fell this low -- 12 percent of corespondents said the economy is in good shape -- the unemployment rate was 7.5 percent and inflation was 14.4 percent, The Washington Post reported Wednesday.

The current doom-and-gloom mood is connected to a 5.5 percent jobless rate and inflation of 4.2 percent.

Consumers' sentiment "at some level … doesn't make a whole lot of sense," economist William Cheney of John Hancock Financial Services old the Post.

But, rising gas and food prices affects more people than falling stock prices, the Post reported.

"Things that you buy more frequently and that have large percentage increases will weigh more in people's perception of inflation," said Eric Johnson of the Columbia Business School.

Similarly, falling house values also affects large numbers of consumers, 68 percent of whom own a home, compared with 21 percent who own stocks, the newspaper said.

Another factor is the population's "frame of reference."

Richard Curtin, who overseas the University of Michigan's monthly Consumer Sentiment report told the Post, compared with today, "people expected very little out of the economy," during previous downturns.

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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