US Economy: Consumer Sentiment Unexpectedly Falls
Nov. 13 (Bloomberg) -- Confidence among U.S. consumersunexpectedly dropped in November as the loss of jobs threatenedto undermine the biggest part of the economy.
The Reuters/University of Michigan preliminary sentimentindex decreased to a three-month low of 66 from 70.6 inOctober. A report from the Commerce Department showed the tradedeficit widened in September by the most in a decade as risingdemand for imported oil and automobiles swamped a fifthconsecutive gain in exports.
Rising joblessness puts the economy at risk of slippinginto a vicious circle of firings and declines in consumerspending that will limit the emerging recovery. The dollar’s 12percent decline since March and growing demand from Asia andEurope will probably spur exports further, giving factories alift and making up for some of the weakness among households.
“Consumers face a lot of headwinds, and risingunemployment is the No. 1 worry,” said David Sloan, a senioreconomist at 4Cast Inc. in New York, whose forecast forconfidence was the lowest of economists surveyed. “Therecovery, in its early stages, will be led by increases inmanufacturing rather than by consumers. Markets in Asia arerebounding quite nicely.”
The U.S. trade gap widened 18 percent to the highest levelsince January, the Commerce Department said. Imports rose 5.8percent, the most since March 1993, as the cost of a barrel ofcrude climbed to the highest level since October 2008 andvolumes also rose. Exports increased 2.9 percent, propelled bysales of aircraft and industrial machines.
Dollar Declines
The dollar dropped after the reports, while stocks climbedas higher-than-expected earnings at Walt Disney Co. andAbercrombie & Fitch Co. overshadowed the drop in confidence.The yen climbed to 89.71 per dollar at 4:23 p.m. in New York,up 0.7 percent from late yesterday. The Standard & Poor’s 500Index rose 0.6 percent to close at 1,093.48.
A collapse in world trade earlier this year brought thegap down to $26.4 billion in May, its lowest level sinceNovember 1999, as imports plunged even faster than exports. Ascommerce begins to pick back up, global leaders agree moreneeds to be done to strengthen the expansion.
U.S. Treasury Secretary Timothy Geithner and other financeministers at the Asia-Pacific Economic Cooperation forum inSingapore this week reiterated a pledge to maintain stimulusefforts “until a durable recovery in private demand issecured.”
APEC Talks
Asia is “leading the world” back to recovery, Geithnertold reporters at a press briefing with his APEC colleagues.President Barack Obama began a swing through Asia today asworld leaders work toward a rebalancing that will make globalgrowth more reliant on spending by Asian consumers andbusinesses and less dependent on their American counterparts.
In the U.S., rising unemployment threatens consumerspending, which accounts for two-thirds of the economy. Thejobless rate jumped to a 26-year high last month and isprojected to remain above 10 percent through the first half ofnext year.
Joblessness may also weigh on Americans as they head intothe holiday shopping season. Macy’s Inc. is among retailersshowing a decline in sales as consumers spend only onessentials such as food and clothing.
The Reuters/University of Michigan gauge of currentconditions, which reflects Americans’ perceptions of theirfinancial situation and whether it is a good time to buy big-ticket items like cars, decreased to 69.6 from 73.7.
Consumer Outlook
The index of consumer expectations for six months fromnow, which more closely projects the direction of consumerspending, dropped to 63.7 from 68.6.
The sentiment index was forecast to rise to 71, accordingto the median of 69 economists surveyed by Bloomberg. Estimatesranged from 67.5 to 75. During the expansion that began in late2001 and ended in December 2007, the index averaged 89.2.
The preliminary Reuters/University of Michigan consumerconfidence report reflects about 300 responses, compared with500 households for the final survey.
Macy’s, the second-biggest U.S. department-store chain, isamong retailers that are more cautious as consumers hold backon discretionary purchases. The Cincinnati-based chain reporteda third-quarter loss as sales fell.
“As we look to the fourth quarter, we are cautiouslyoptimistic,” Chief Financial Officer Karen Hoguet said on aconference call with analysts and investors on Nov. 11. “Thereis more uncertainty than usual in the environment.”
To contact the reporter on this story:Shobhana Chandra in Washington at schandra1@bloomberg.net;Bob Willis in Washington at bwillis@bloomberg.net
Last Updated: November 13, 2009 16:27 ESTSource: Bloomberg
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