US Consumer Data Disappoints

The domestic market in America accounts for something like 70% of the nation’s economic output. Whilst international trade is vital for the USA, it is domestic demand which is the engine of growth in the world’s largest economy. Global events are often said to be of lesser importance to the citizens of this continent-sized country, but whilst that may be true to a certain extent at the individual level, it is far from the case on a macro-economic scale.

The dominant global economic event of the moment is, of course, the European sovereign debt crisis which is at a critical phase for determining the fate of Greece within the Euro and whether Spain can continue to meet market rates for servicing its debt. The crisis is contributing to global uncertainty which has seen a slowing of demand around the world.

In an important consumer confidence survey, it has been revealed that sentiment amongst the American public has weakened to its lowest level in eight months in May. The slump is blamed on fears about the global economy, and a weak US stock market. The Consumer Confidence Index dipped to 64.9 from last month’s reading of 68.7 – at its nadir during the worst of the global financial crisis, it slumped to an historic low of 25.3 (February 2009). Analysts had expected the index to rise to a level of 70 this month.

The US Dollar has appreciated by 12.2% against the Euro over the past twelve months and a Euro is currently buying $1.2523. The European sovereign debt crisis is forcing the Euro lower as speculation about its membership and very continuation pervades, but frankly, it is “too big to fail”, to coin a phrase. The silver lining to this particular cloud is that it does make Eurozone exports more competitive in importing markets which is a good thing for European manufacturers.