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Consumer Sentiment Index declined in October

10/15/2010

Ann Arbor, Mich. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment, released Friday, showed that confidence among U.S. consumers unexpectedly declined in October, with Americans more pessimistic about current economic conditions.

The index decreased to 67.9, the lowest since July, from 68.2 in September.

Unemployment projected to remain above 9% through next year may keep weighing on sentiment and make Americans reluctant to ramp up their spending, which accounts for 70% of the economy.

The Thomson Reuters 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.

Separate figures from the Labor Department on Friday showed consumer prices rose 0.1% in September, less than forecast. The Commerce Department said Friday that retail sales climbed more than forecast in September; spending rose 0.6% following a 0.7% gain in August that was larger than previously estimated.

Consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 64.6 from 60.9, which was the lowest since March 2009, according to the Friday sentiment index.

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 such as cars, dropped to 73, the lowest since November, from 79.6 in the previous month.

Other index results showed that consumers expect an inflation rate of 2.6% over the next 12 months, compared with 2.2% projected in September.

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