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U.S. Michigan Consumer Sentiment Index Fell to 67.8

Shopper in a checkout line
Shoppers push carts through the new Target Corp. store in the East Harlem neighborhood of New York. Photographer: Tom Starkweather/Bloomberg

July 30 (Bloomberg) -- Confidence among U.S. consumers fell in July to the lowest level since November, posing a threat to the biggest part of the economy.

The Thomson Reuters/University of Michigan final index of consumer sentiment declined to 67.8 this month from 76 in June. The preliminary measure was 66.5.

Employment growth has been slow to take hold and lower home prices are depressing wealth. The lack of confidence may further restrain consumer spending, which accounts for 70 percent of the economy, and limit the pace of growth.

“Consumers have a lot to be concerned about,” Eric Green, chief market economist at TD Securities Inc. in New York, said before the report. “Private job growth is showing signs of slowing, not accelerating,” he said, and stock prices have declined since peaking in April.

Economists forecast the index would fall from the previous month to 67, according to the median of 58 projections in a Bloomberg News survey. Estimates ranged from 57.5 to 73.

Stocks pared losses after a measure of business activity expanded in July more than forecast. The Institute for Supply Management-Chicago Inc. said its business barometer rose to 62.3 this month. Readings higher than 50 signal growth. The Standard & Poor’s 500 Index fell 0.4 percent to 1,097.6 at 10:10 a.m. in New York.

The economy slowed in the second quarter as consumer spending cooled, according to Commerce Department data released earlier today. Gross domestic product increased at a 2.4 percent annual rate last quarter.

Second-Quarter Spending

Consumer spending grew at a 1.6 percent pace in the second quarter, compared with a 1.9 percent rate the previous three months.

The University of Michigan’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, fell to 76.5 from 85.6 in the prior month.

The index of consumer expectations for six months from now, which more closely projects the direction of spending, dropped to 62.3 from 69.8.

Consumers in the survey said they expect an inflation rate of 2.7 percent over the next 12 months, compared with 2.8 percent in June.

Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 2.9 percent rate of inflation, compared with 2.8 percent the prior month.

Stocks have been gyrating amid concerns about the economy and cooling global growth and optimism about companies’ second-quarter earnings. The S&P 500 Index has fallen 0.4 percent so far in July through yesterday.

July Employment

Job gains will be needed to boost sentiment and spending. In June, private employers added fewer workers than projected by economists, while overall payrolls fell, reflecting a drop in federal census workers. The Labor Department is scheduled to release its July payrolls report on Aug. 6.

Americans have become more frugal as the labor market struggles to gain strength and limit incomes.

SuperValu Inc., the operator of the Albertson’s grocery-store chain, said this week that fiscal first-quarter food sales fell compared with a year earlier and consumers purchased fewer items per basket.

“We see huge increases in coupon usage across our enterprise,” Chief Executive Officer Craig Herkert said on a conference call July 27. “We continue to see as you all know, massive unemployment but also underemployment and particularly in some of the big markets where we are, it’s certainly more challenged than in the country as a whole.”

To contact the reporter on this story: Courtney Schlisserman in Washington

To contact the editor responsible for this story: Brendan Murray

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