Consumer Sentiment Gauge in U.S. Posts First Drop Since February on Jobs

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Source: Bloomberg

July 24 (Bloomberg) -- Confidence among U.S. consumers fell in July for the first time in five months as mounting unemployment and depressed wages shook households.

The Reuters/University of Michigan final index of consumer sentiment decreased to 66, in line with forecasts, from 70.8 in June. A preliminary reading was 64.6.

The biggest employment slump of any recession in the last eight decades may be making more Americans feel their jobs are in jeopardy. The growing insecurity, together with falling home values, is prompting households to limit spending and save more, meaning an economic recovery will take time to gain speed.

“Consumers are aware that the labor market is still pretty bleak even if the economy is going to grow in the second half” of the year, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Any recovery in consumer spending will be very, very modest. This clearly is a restraint on the economy.”

Stocks retreated from the highest levels of the year after Microsoft Corp., American Express Co. and Amazon.com posted disappointing quarterly results. The Standard & Poor’s 500 index fell 0.8 percent to 968.70 at 10:27 a.m. in New York. Treasury securities were little changed.

The confidence index was forecast to fall to 65, according to the median of 57 economists surveyed by Bloomberg News. Estimates ranged from 62.5 to 68. During the expansion that began in late 2001 and ended in December 2007, the index averaged 89.2.

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