U.S. Michigan Consumer Sentiment Index Rose in August From Eight-Month Low
Confidence among U.S. consumers rose less than forecast in August from an eight-month low, a sign that the biggest part of the economy will be slow to recover.
The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 68.9 from 67.8 in July that was the lowest reading since November. The gauge was projected to rise to 69.6, unchanged from a preliminary reading issued earlier this month, according to the median forecast of 65 economists in a Bloomberg News survey.
A lack of confidence raises the risk of a slump in consumer spending, which accounts for about 70 percent of the economy, and adds to concern the U.S. may slip back into recession. Federal Reserve Chairman Ben S. Bernanke today said household purchases may increase “relatively slowly” and said the central bank will do “all that it can” to spur the recovery.
“Consumers are not convinced about this recovery,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report. “They’re feeling they don’t need to be spending. It’s a major worry for the second-half outlook.”
Survey estimates ranged from 65.7 to 72. The index averaged 89 in the five years leading up to the recession that began December 2007.
Less Growth
The world’s largest economy expanded at a slower pace in the second quarter than the government initially estimated, a Commerce Department report showed today. Gross domestic product grew at a 1.6 percent annual rate, exceeding the 1.4 percent median forecast of economists surveyed. The government last month estimated the growth rate at 2.4 percent.
The confidence survey’s gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, rose to 78.3 from 76.5 in July.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to 62.9 from 62.3.
Consumers in the survey said they expect an inflation rate of 2.7 percent over the next 12 months, the same as in July.
Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 2.8 percent rate of inflation, compared with 2.9 percent the prior month.
Lack of Jobs
Firings remain elevated as the recovery slows, while firms are reluctant to hire. Companies created 51,000 jobs on average from May through July, down from 200,000 in the prior two months, Labor Department data showed. The unemployment rate, which reached a 26-year high of 10.1 percent in October 2009, will exceed 9 percent next year, according to a Bloomberg survey.
AnnTaylor Stores Corp., a women’s apparel chain, reported second-quarter net sales that were less than the average estimate of analysts in a Bloomberg survey.
The New York-based company expects “a choppy macroeconomic environment and somewhat unpredictable levels of consumer spending throughout the remainder of 2010,” Michael Nicholson, chief financial officer, said on a conference call on Aug. 20.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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