Michigan Consumer Sentiment Index Decreased in October
U.S. Michigan Consumer Sentiment Index Decreased
Matthew Staver/Bloomberg
Wal-Mart Stores Inc. and Target Corp. are among retailers using discounts and promotions to lure budget-conscious shoppers during the holidays.
Wal-Mart Stores Inc. and Target Corp. are among retailers using discounts and promotions to lure budget-conscious shoppers during the holidays. Photographer: Matthew Staver/Bloomberg
Confidence among U.S. consumers fell in October to the lowest level in almost a year, which may temper the biggest part of the economy.
The Thomson Reuters/University of Michigan final index of consumer sentiment decreased to 67.7 from 68.2 in September. Economists had forecast a reading of 68, almost matching the preliminary figure of 67.9, according to the median estimate in a Bloomberg News survey.
A jobless rate projected to stay above 9 percent through next year may restrain consumer optimism and prompt Americans to limit their purchases, which account for 70 percent of the economy. Wal-Mart Stores Inc. and Target Corp. are among retailers using discounts and promotions to lure budget- conscious shoppers during the holidays.
“Households remain worried about the economy,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients. “It is unlikely that sentiment will improve to truly optimistic levels until robust job creation returns.”
The October figure was the lowest since November 2009. Forecasts in the Bloomberg survey of 63 economists ranged from 67 to 70. The sentiment index averaged 89 in the five years leading up to the recession that began in December 2007 and has yet to reach that level since the recovery began in June 2009.
Figures earlier today from the Commerce Department showed the U.S. economy grew at a 2 percent annual rate in the third quarter as consumer spending climbed the most in almost four years, a sign the expansion is developing staying power.
Business Barometer
Business activity in the U.S. unexpectedly accelerated in October. The Institute for Supply Management-Chicago Inc. said its business barometer rose 60.6 this month from 60.4 in September. Figures greater than 50 signal expansion.
Stocks fell and Treasury securities rose after the reports. The Standard & Poor’s 500 Index decreased 0.2 percent to 1,181.74 at 11:32 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to prices, fell to 2.61 percent from 2.66 percent late yesterday.
Consumer spending increased at a 2.6 percent annual rate from July through September, the fastest since the end of 2006, the Commerce Department’s figures also showed. Purchases added 1.8 percentage points to third-quarter growth.
The pace of growth may not be strong enough to help reduce the unemployment rate, one reason why Federal Reserve policy makers may soon begin pumping more money into the economy.
Unemployment Forecast
The jobless rate will average 9.6 percent this year and 9.3 percent in 2011, according to a Bloomberg survey earlier this month, marking three years of unemployment above 9 percent, the longest period since monthly records began in 1948.
Consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 61.9 from 60.9, which was the lowest since March 2009, today’s confidence report showed.
The survey’s measure 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, dropped to 76.6 from 79.6 in September.
Consumers in today’s survey said they expect an inflation rate of 2.7 percent over the next 12 months, compared with 2.2 percent projected in September. Over the next five years, the measure tracked by Fed policy makers, Americans expect a 2.8 percent rate, up from 2.7 percent forecast last month.
Holiday Sales
The National Retail Federation has forecast November- December sales will rise by 2.3 percent from a year ago, making it the best holiday season in four years. Merchants including Wal-Mart, the world’s largest retailer, Target, Amazon.com Inc. and EBay Inc. will benefit as shoppers look for bargains, according to results of a survey issued this month by Consumer Edge Research in Stamford, Connecticut.
With less than a week before the Nov. 2 elections, Americans continue to have a dimmer view of Congress and President Barack Obama’s handling of the economy. Obama’s job approval over a three-day period that ended Oct. 26 was 44 percent, compared with 51 percent at the same time last year, according to a poll from Princeton, New Jersey-based Gallup.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz cwellisz@bloomberg.net
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