Americans’ Economic Outlook Plunges…”Rosy scenario gets tangled up in reality.”

Wednesday, August 26, 2015
By Paul Martin

by Wolf Richter
WolfStreet.com
August 25, 2015

The rout in Chinese stocks, the deteriorating Chinese economy, the subsequent rout in US stocks, and nagging questions about the US economy – they all got blamed for the unceremonious collapse of the confidence Americans have in our rosy scenario.

It’s sinking in. Even NPR has been talking about it. Whatever you do, “don’t sell,” was their admonition today. Those kind of shows first thing in the morning don’t fit into our rosy scenario.

That scenario looked a lot rosier in early January, when after a long hard climb the economic confidence of Americans reached the highest level in the Index since Gallup started collecting the data on a weekly basis in 2008. At the time, Gallup credited lower gas prices for the miracle.

At +5 in January, the index wasn’t exactly wallowing in exuberance, given its theoretical range of +100 to -100 (it hit -65 during the Financial Crisis). But these folks don’t live in the Wall-Street economy. They struggle with their daily challenges in the real economy. And it’s tough out there.

Yet, even at that level in January, lousy as it was, it was practically exuberant compared to what it is today.

In February, the economic confidence began to zigzag south. At first, it looked like statistical noise, the normal volatility of weekly data. But month after month it got worse. And for the week ending August 23, which Gallup released today, the index dropped to -14. The culprit, according to Gallup:

Growing concerns about China, which devalued its currency and saw major losses in its stock market, led to a global stock sell-off, including in the U.S., where the Dow Jones declined by more than 500 points by market close on Friday.

However, the mayhem in these departments that has happened since Friday hasn’t made it into the index yet.

The Rest…HERE

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