Consumer confidence slumps to recession levels in US, UK and the EU
Posted on 31 August 2011 with no comments from readers
Consumer confidence has slumped to levels normally associated with recession in the US, UK and Germany in a reversal of the recovery seen earlier this year.
The US Conference Board’s index of consumer sentiment fell from 59.2 in July to 44.5 this month, the lowest level since the depth of the 2009 recession. In the European Union the EU Commission’s economic sentiment index dipped below the economic contraction line in August.
UK recession?
Data from GfK NOP showed UK consumer confidence slumped again in August back to -31, a level not seen since the recession of the early 1990s and 2008-9.
Trying to grow economies against such a headwind is impossible. Consumer spending accounts for 70 per cent of GDP in the US with the EU and UK in a similar position.
The specter of a double-dip recession is upon us, and with growth very low in the case of the US and virtually gone in the EU and UK this must be judged a near certainty and not a 50:50 chance as markets expect.
Financial markets that have turned volatile over the summer will turn deadly dangerous this autumn and those advising their clients to hold on will be again shown up as self-serving charlatans.
Yesterday the price of gold jumped 2.8 per cent and silver by 3.7 per cent. The recent sell-off was a great buying opportunity but that window of opportunity is closing fast.
For stocks we can only be a matter of weeks at the most until the market tips over. The obvious cause will be some kind of banking crisis in the eurozone, and there are so many possible candidates it is impossible to say who might bring this house of cards down.
ECB stuck
The ECB is being attacked for exceeding its mandate by powerful German politicians and constitutional lawyers for buying Spanish and Italian bonds recently. Yet it raised interest rates in July and made things tougher for European banks by tightening liquidity.
This does not bode well for a central bank rescue this autumn in the EU. The authorities may well reason that it will take more pain before their medicine will be accepted, and that could still be the wrong one.
It therefore looks as though the Lehman moment is coming with the EU allowing its banking crisis to get out of control – a very worrying development as the ECB is just not the Fed.
