U.S. consumer sentiment dropped in October to its lowest level since the end of last year as consumers worried congressional dysfunction and the resulting partial shutdown of the federal government would hurt growth, a survey released on Friday (Oct. 25) showed.
The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 73.2 in October from 77.5 in September and was the lowest final reading since December 2012.
Reuters reported that the October figure was lower than both the 75.0 forecast by economists in a Reuters poll and the mid-month preliminary reading of 75.2.
“Not too pretty but not a disaster after all,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. Fiscal fights in Congress “took their toll,” with a drumbeat of negative news eroding sentiment.
The federal government shut down for 16 days in the first half of October as Republicans in Congress sought to undermine President Barack Obama’s signature health care law as a condition of funding the government.
The government also came close to breaching its borrowing limit, which compounded the crisis and could have pushed the country closer to a historic debt default.
While a last-minute agreement averted that outcome by raising the debt ceiling until early next year, rating agency Fitch warned it could still cut the U.S. sovereign credit rating because of the political brinkmanship.
“When asked to describe in their own words what they had heard about recent economic developments, the number of consumers that negatively mentioned the federal government in October was the highest in the more than half-century history of the surveys,” survey director Richard Curtin said in a statement.
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U.S. consumer sentiment deteriorated in October to its weakest level in nine months as the first federal government shutdown in 17 years undermined Americans’ outlook on the economy, a survey released on Friday (Oct. 11) showed.
The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment fell to 75.2 in October, down from 77.5 in September. According to a Reuters report, this was the lowest figure since January.
The early October reading fell short of the 76.0 forecast by economists recently polled by Reuters.
While the sentiment gauge declined for a third straight month, the size of the decrease was relatively small, as worries about a protracted shutdown were mitigated by some optimism about income and inflation, survey director Richard Curtin said.
“Consumer confidence posted a surprisingly small decline in early October despite widespread awareness of the government shutdown,” Curtin said in a statement.
“The muted response may be due to consumers giving progressively less credence to the economic scare tactics that have framed the debates over the past few years,” he said.
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Americans’ confidence in the economy fell slightly in September from August, as many became less optimistic about hiring and pay increases over the next six months.
The Associated Press reported that the Conference Board, a New York-based private research group, said Tuesday that its consumer confidence index dropped to 79.7 in September. That’s down from August’s reading of 81.8, which was slightly higher than previously estimated.
Consumers’ confidence is closely watched because their spending accounts for 70% of economic activity. The September reading was only slightly below June’s reading of 82.1, the highest in 5 ½ years.
While confidence has bounced back from the depths of the Great Recession, it has yet to regain a reading of 90 that typically coincides with a healthy economy.
In September, confidence fell on a dimmer outlook for the next few months. Lynn Franco, who oversees the survey, said that reflected concerns about the job market and wages. Consumers were actually more optimistic about present conditions.
“While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead,” Franco said.
Recent data suggest economic growth may be slowing. Consumers spent more cautiously in August as their income barely grew. And higher interest rates are threatening to slow home sales, just as many markets are starting to recover.
The economy added 169,000 jobs in August, a modest gain but hardly enough to signal robust job growth. The U.S. unemployment rate fell to 7.3% from 7.4%. But the decline was mostly because more people stopped looking for work and were no longer counted as unemployed.
A weaker outlook for the rest of the year was a key reason the Federal Reserve decided last week to hold off on slowing its $85-billion-a-month in bond purchases. The bond purchases have kept longer-term interest rates low, making mortgages and other consumer loans more affordable. Many economists believe the Fed won’t reduce the bond purchases until December at the earliest.
The economy has been held back this year by tax hikes, federal spending cuts and weaker global growth. It expanded at an annual rate of 2.5% in the April-June quarter. But many economists say growth is slowing in the July-September quarter to an annual rate of 2% or less.
Confidence among U.S. consumers unexpectedly increased in August as Americans grew more optimistic about the prospects for the world’s largest economy.
Bloomberg reported that the Conference Board’s index of sentiment advanced to 81.5 from a revised 81 the prior month that was stronger than initially estimated, the New York-based private research group reported today. The median forecast in a Bloomberg survey of economists was 79.
Sustained job growth and increased wealth tied to higher home values and stock portfolios are helping to sustain the household spending, boosting automakers and home-improvement retailers such as Lowe’s Cos. Today’s report showed more Americans expected a pickup in employment opportunities and income gains in the next six months.
“The household sector is still improving and a lot of that improvement comes from home prices,” said Sam Coffin, an economist at UBS Securities LLC in Stamford, Connecticut. UBS Securities is the top forecaster of the Conference Board’s index in the last two years, according to data compiled by Bloomberg.
Estimates for consumer confidence ranged from 74.3 to 82 in the Bloomberg survey of 71 economists after an initial July reading of 80.3. The measure averaged 53.7 during the recession that ended in June 2009. The cutoff date for the Conference Board’s survey was Aug. 15.
The number of Americans traveling for the Labor Day holiday weekend will climb to the most in five years as consumer confidence boosts spending, AAA forecast.
The Associated Press reported that people taking trips of 50 miles or more from home will increase to 34.1 million from 32.7 million last year, AAA, the biggest U.S. motoring organization, said in its annual outlook. That’s the highest level since a record 45.1 million travelers five years ago. The long weekend runs from Aug. 29 to Sept. 2.
“Consumers are the most upbeat they have been since early 2008,” according to AAA, which cited economic optimism fueled in part by a strengthening housing market.
The Thomson Reuters/University of Michigan index of consumer sentiment in the U.S. hit a six-year high in July. New-home construction climbed 5.9% to an 896,000 annualized rate that same month, and the S&P/Case-Shiller index of property values in 20 cities rose 12.2% in May from a year earlier, the biggest 12-month gain since March 2006.
The expected gain in Labor Day travel is driven by “the increasingly positive economic outlook and optimism in the housing market,” Robert L. Darbelnet, chief executive officer of Heathrow, Florida-based AAA said in a statement. “As home prices improve in many parts of the country, more families are feeling comfortable about traveling this Labor Day holiday.”
Travel by automobile will rise 4.3% to 29.2 million travelers from 28 million a year ago. The number of air travelers during the holiday will increase 2.8% to 2.61 million from 2.54 million a year ago, making up 8% of travel, according to AAA.
As of mid-August, retail gasoline prices were about 2.7% lower than the same time a year ago, AAA said. The price at the pump last Labor Day averaged $3.83 a gallon, a record high for the holiday. Retail gasoline, averaged nationwide, fell 0.1 cent yesterday to $3.537 a gallon, AAA said today on its website, the lowest level since July 10.
Americans are more confident about the economy than at any time since July 2007, a survey found, suggesting consumers will spend more and accelerate growth in the months ahead.
According to an Associated Press report, the University of Michigan said that its final reading of consumer sentiment in July was 85.1. That’s up one point from June and nearly 13 points higher than a year ago.
Rising home prices and steady job gains are bolstering household wealth and income. The proportion of Americans who expect their inflation-adjusted incomes to rise in the coming year is greater than at any time since late 2007, the survey found. And the percentage of Americans who say their home values have risen is also at a six-year high.
Consumer confidence is closely watched because spending by Americans accounts for 70% of the economy’s growth.
The University of Michigan polls roughly 500 people throughout the month and issues two readings. Americans’ expectations for future growth dipped, while their assessment of current conditions improved.
Consumers have been resilient despite paying higher taxes this year. Their spending growth most likely slowed in the April-June quarter after rising at the fastest pace in two years in the first quarter.
But with hiring solid and confidence rising, most economists forecast that consumers will step up spending and help propel economic growth later this year.
Consumer confidence unexpectedly cooled in July as Americans became less optimistic about the outlook for the economy.
Bloomberg reported that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 83.9 in July from 84.1 the month prior, today’s report showed. The median forecast in a Bloomberg survey called for a gain to 84.7. The gauge reached an almost six-year high of 84.5 in May.
The recent increases in mortgage rates and prices at the gas pump may have restrained consumers’ views on the economy in the next six months. At the same time, the group’s gauge of current conditions jumped to a six-year high as stock prices approached a record after falling in the middle of June.
“It’s a slip in confidence from recent highs rather than the start of a new downward,” said Gennadiy Goldberg, a strategist at TD Securities Inc. in New York. “As we get later in the year and the economy improves, consumers will start to see better numbers and they’ll notice that.”
Forecasts of the 66 economists for sentiment in the Bloomberg survey ranged from 80 to 88. The index averaged 64.2 during the recession that ended in June 2009, and 89 in the five years prior.
The Michigan survey compares with the weekly Bloomberg Consumer Comfort Index (COMFCOMF), which climbed to minus 27.3 in the week ended July 7, the highest level in more than five years, from minus 27.5. The figures showed Americans were more upbeat about their finances than at any time since April 2008, while a gauge of the buying climate increased to a nine-week high.
Other figures today showed prices paid to producers rose 0.8% in June, more than projected and the most since September.
The Michigan survey’s measure of current conditions, which takes stock of Americans’ views of their personal finance, increased to 99.7 in July from 93.8 at the end of last month.
The gauge of expectations six months from now fell to 73.8 from 77.8.
Mortgage rates this week climbed to the highest level in two years. The average 30-year fixed rate was 4.51% in the week ended yesterday, according to data from Freddie Mac. In November, it fell to a record low of 3.51%.
Gasoline prices have also increased this week. The average cost of a gallon of regular gas in the U.S. was $3.55 yesterday, up from $3.47 at the end of last week, according to figures from AAA, the nation’s largest motoring organization.
Consumer sentiment improved in late June, ending the month close to a near six-year high set in May, as optimism among higher-income families rose to its strongest level in six years, a survey released on Friday (June 28) showed.
Reuter’s reported that the Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment was 84.1 points, just slightly below a near six-year high of 84.5 in May. The late-June figure was higher than the preliminary reading of 82.7. Economists polled by Reuters had forecast the final June reading of 82.8.
“Consumers believe the (economic) recovery has achieved an upward momentum that will not be easily reversed,” survey director Richard Curtin said in a statement.
He added the recent drop in stock prices and the jump in mortgage rates have not caused a deterioration in consumers’ view on the economy.
“To be sure, few high or low income consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead,” Curtin said.
Consumer sentiment is considered by some economists as a predictor on consumer spending, which accounts for 70% of the U.S. economy.
The latest Thomson Reuters/University of Michigan data was consistent with the June consumer confidence readings from the Conference Board released earlier this week. The research group’s U.S. consumer confidence index rose to 81.4 this month, the highest since January 2008.
Household expenditures, however, have remained sluggish despite improving optimism. Consumer spending grew at an annualized 2.6% in first quarter, faster than the 1.8% pace in the last three months of 2012 but slower than an earlier government estimate of 3.4%.
The barometer of current economic conditions ended at 93.8 in June, down from 98.0 in May. This was above an early June reading of 92.1 and economists’ forecast of 92.8.
The survey’s gauge of consumer expectations ended June at its highest level since October at 77.8, up from 75.8 in May. The latest reading was stronger than the preliminary June figure of 76.7. Economists had projected a late-June figure of 77.0.
Consumer confidence in June has eased from a six-year high as progress in the labor market supported Americans’ views of the economic outlook.
Bloomberg News reported that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 82.7 in June from 84.5 the prior month that was the highest since July 2007, a report today showed. The median forecast in a Bloomberg survey was unchanged at 84.5.
Steady hiring gains coupled with rising equity prices and property values are underpinning Americans’ confidence. Further improvement from the 175,000 jobs added last month may be needed to help accelerate the consumer purchases that make up about 70% of the economy.
“The labor market does seem to be gaining some traction so far in 2013,” Kevin Cummins, an economist at UBS Securities LLC in Stamford, Conn., said before the report. “House prices continue to recover and equity values continue to rise, at least on balance, ahead of the last couple days. That is adding important support to consumption.”
Forecasts in the Bloomberg survey ranged from 82 to 89. The index averaged 64.2 during the recession that ended in June 2009 and 89 in the five years prior.
The Michigan survey follows the weekly Bloomberg Consumer Comfort Index, which slipped to minus 31.3 for the period ended June 9, a two-month low, from minus 29.7. It reached a five-year high of minus 28.9 in late April.
The number of recreational vehicles delivered to dealers’ lots is expected to reach a six-year high in 2013 as fledgling RV buyers such as Karen and Jim Smith, of San Jose, Calif., shake off the economic slumber of the past few years and prepare to hit the road this summer.
“There are just so many things to see that we’ve never seen before: Mount Rushmore, the Grand Canyon, Lookout Mountain in Tennessee,” Karen Smith said after writing a $21,000 check for her 18-foot 2014 White Water Retro Travel Trailer that came stocked with a queen-size bed, separate refrigerator and freezer, two-burner stove, microwave, full-size bath, shower and beds for three more people.
As reported by the San Jose Mercury News, the Smiths represent new hope for a U.S. RV industry that sustained a series of body blows beginning with the 2008 recession but now appears to be rebounding in the Bay Area and beyond.
The industry has not seen more than 300,000 RVs shipped to dealers around the country since 2007, the year before the recession took hold. But deliveries this year were up 11% in the first quarter and the RV industry now expects to see a total of 307,300 deliveries of motor homes and tow-able RVs. Towables make up the overwhelming majority of RV sales in the U.S.
The number of both registered motor homes and towable RVs had been steadily falling in California from a 2005 peak of 11,494 motorhomes and 34,032 towable RVs and may have bottomed out in 2009 with 2,633 registered motorhomes and 8,820 towables.
Last year, the number jumped to 3,785 registered motorhomes and 11,565 towable RVs, according to Statistical Surveys Inc., which tracks RV registrations across the country.
“Our industry is an economic indicator,” said Kevin Broom, spokesman for the Virginia-based Recreation Vehicle Industry Association (RVIA). “When shipments go down, they usually go down ahead of a recession. When shipments come back, they usually come back ahead of the recovery. Consumers in general are a little more confident they’ll have their job this year, next year and even five years from now. So they’re ready to make a purchase.”
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