07.16.10
The U.S. Consumer Sentiment Index tumbled in July, falling 9.5 points, according to the University of Michigan. Strange thing is, nobody knows why.
According to researchers, the sentiment index doesn't drop this much unless something really big shocks the economy and the national psyche. The shocking thing about this month's decline is that nothing really shocking happened between June and July. In fact, in the 32-year history of this survey, it's fallen by 9.5 points or more on only six other occasions:
October 2008: The month after Lehman Bros. collapsed;
October 2005: The month after Hurricane Katrina hit;
September 2001: The month terrorists attacked America;
August 1990: The month Kuwait was invaded;
March 1980: The month the stock market plunged and confirmed that the nation had entered a recession. Observers note that only once did the sentiment index fall so far without being accompanied by an event so big that it's in the history books: December 1980. Then, as now, Americans were anxious about the future of the economy, which had just emerged from a recession. They had elected a president who promised big changes, but the people weren't quite sure what that meant, or whether the new policies would work. The market sold off. The economy dipped back into an extremely brutal recession soon thereafter.
According to researchers, the sentiment index doesn't drop this much unless something really big shocks the economy and the national psyche. The shocking thing about this month's decline is that nothing really shocking happened between June and July. In fact, in the 32-year history of this survey, it's fallen by 9.5 points or more on only six other occasions:
October 2008: The month after Lehman Bros. collapsed;
October 2005: The month after Hurricane Katrina hit;
September 2001: The month terrorists attacked America;
August 1990: The month Kuwait was invaded;
March 1980: The month the stock market plunged and confirmed that the nation had entered a recession. Observers note that only once did the sentiment index fall so far without being accompanied by an event so big that it's in the history books: December 1980. Then, as now, Americans were anxious about the future of the economy, which had just emerged from a recession. They had elected a president who promised big changes, but the people weren't quite sure what that meant, or whether the new policies would work. The market sold off. The economy dipped back into an extremely brutal recession soon thereafter.