US Consumers Remain Wary of Economy’s Health, Survey Says

29 May 2015 | Author: | No comments yet »

Consumer Sentiment in U.S. Decreased in May to Six-Month Low.

WASHINGTON (MarketWatch) — In a negative sign for an economy that contracted in the first quarter, data released Friday showed that consumer sentiment dropped in May to a six-month low. Economists polled by Dow Jones Newswires had expected a final May level of 89.5, compared with a preliminary estimate of 88.6. “Consumer optimism retreated in May as consumers adopted more modest prospects for a rebound following the economy’s dismal 1st quarter performance,” according to the University of Michigan.

Household concerns that the economy is stumbling and wages will be slow to increase combined to depress spirits at the same time gradually rising gas prices took a bit more of consumers’ incomes. Continued improvement in the labor market that includes greater job security probably needs to be accompanied by pay gains to encourage more spending and propel growth. “The index is still quite high,” Richard Curtin, director of the Michigan Survey of Consumers, said on a conference call after the figures were released.

A swelling trade gap subtracted the most from the economy in 30 years as a stronger dollar caused exports to slump, while imports rose following resolution of a labor dispute at West Coast ports. Curtin said, “Overall, the latest data are still consistent with a 3% annual growth rate in real personal consumption expenditures during 2015.” One factor in favor of better consumer spending was the upbeat outlook for personal earnings. “Overall, 86% of all households anticipated their financial situation would be the same or improve during the year ahead, while just 12% of all households expected their finances to worsen,” the Michigan report said. Government Accountability Office, investigators for Congress, recently reported that contingent workers, those without permanent jobs, have seen their share of the total labor force grow in recent years. While the Conference Board’s consumer confidence index advanced to a reading of 95.4 this month from April’s 94.3, the measure is down from a more than seven-year high of 103.8 reached in January. Retail sales barely budged in April and followed a 0.2 percent drop from January through March that marked the first quarterly decline in almost three years.

Growth will probably pick up after a weak start to the year, according to Federal Reserve policy makers, who are trying to figure out when the economy will be strong enough to withstand their first interest rate increase since 2006. Gas prices have been increasing since early this year, rebounding from 2014’s large drop. “Price perceptions for a wide range of goods have grown less positive despite low overall inflation,” said Richard Curtin, chief economist for the sentiment survey. Fed Chair Janet Yellen said in a May 22 speech she expects the economy to return to a “moderate” pace of growth after a disappointing first quarter as headwinds such as a cooling global economy abate.

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