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Consumer Sentiment in U.S. Falls to Lowest Level Since April

Consumer Sentiment in U.S. Falls to Lowest Level Since April
A pedestrian carries a shopping bag while crossing at Easton Town Center in Columbus, Ohio. Photographer: Luke Sharrett/Bloomberg

Confidence among consumers declined to a five-month low in September as Americans’ views on the economy dimmed.

The Thomson Reuters/University of Michigan final index of sentiment decreased to 77.5 this month from 82.1 in August. The median estimate in a Bloomberg survey called for a drop to 78, after a preliminary reading of 76.8.

Higher mortgage rates that threaten to slow momentum in the housing market may be making Americans less sanguine about the economic outlook. Stronger job and wage growth would help bolster spending for those lower-income households that aren’t benefiting from the recent upswing in stocks and home prices.

“Most surveys show that consumer confidence has softened in recent months,” Ryan Wang, a New York-based economist at HSBC Securities USA Inc., said before the report. “The reading is still higher than a few years ago, and that’s mostly due to higher home prices and gradual improvement in the labor market”

Estimates in the Bloomberg survey ranged from 76 to 81.5. The index averaged 89 in the five years leading up to the recession that began in December 2007, and 64.2 during the 18-month slump that ended in June 2009.

The Michigan sentiment survey’s current conditions index, tracking Americans’ view of their personal finances, decreased to 92.6 from 95.2 last month.

The gauge of expectations six months from now declined to 67.8 this month from 73.7 in August.

Bloomberg Measure

The Michigan sentiment index stands in contrast to the Bloomberg Consumer Comfort Index, which has increased in the last three weeks. The gauge rose in the period ended Sept. 22 to minus 28.1, the highest since the second week of August, from minus 29.4.

At the same time, the Conference Board’s confidence index decreased to a four-month low in September, the New York-based private research group said this week.

Higher interest rates may be weighing on consumers’ moods. The rate on a 30-year fixed loan rose to 4.58 percent last month, the highest in two years, according to Freddie Mac data. A report this week showed that new-home sales in August and July posted the weakest back-to-back readings this year.

Rates have increased on speculation that Federal Reserve policy makers would begin reducing the pace of stimulus after their Sept. 17-18 meeting. The Fed decided to maintain its level of bond buying until it sees more evidence of a sustained recovery. Since then, the average rate on 30-year mortgages has stabilized.

Net Worth

Household net worth, supported in part by rising property values, climbed by $1.34 trillion in the second quarter, Fed data showed this week.

An improving job situation would also help propel spending. Applications for unemployment benefits unexpectedly dropped last week, a sign employers are retaining staff to meet demand.

At the same time, companies have been slow to add more workers to their payrolls. U.S. retailers are expected to reduce their holiday hiring by about 6.9 percent compared with last year, according to Challenger, Gray & Christmas Inc., a Chicago-based employment consulting firm.

“While the economy and the job market are improving, it has now been four years since the recession officially ended and millions of Americans are still unemployed or underemployed,” John Challenger, the firm’s chief executive officer, said in a statement this week.

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