US consumers more pessimistic about economic recovery

US consumers more pessimistic about economic recovery

11-14-2009 08:26

Consumers in the US remain pessimistic about the sustainability of the economic improvement, proved by the University of Michigan/ Reuters consumer sentiment index published today. At the start of November, the consumer sentiment gauge dropped to 66.0, in comparison to 70.6 in October.

More gloomy

In September, the gauge climbed to 73.5, as it has now dropped during two consecutive months. Consumers remain unsettled about the economic recovery given the fact that unemployment continues to rise, as it reached a 26-year record high of 10.2% in October.

Weak consumer confidence

Jennifer Lee, an economist at BMO Capital Markets, commented: “As long as the jobless rate doesn’t decline and we have not started to create jobs, consumer confidence will remain quite weak, frustrating a more substantial improvement in spending. Economists forecasted an increase to 71.8.

Consumer views

Consumers' expectations regarding the economy in the near future dropped to 63.7 from 68.6. Consumers' judgment about the present situation of the economy declined from 73.7 to 69.6. It’s the first month that these sub-indexes have fallen since July.

Inflation expectations

Expectations concerning inflation in 2010, fell from 2.9% to 2.8%. Inflation expectations for the next five years rose from 2.9% to 3.1%. Fed representatives stated that they are monitoring consumer expectations regarding inflation sharply. The stability of expectations have strengthened the officials, despite the historically low zero-rate fiscal policy by the Federal Reserve.

Trade deficit

The US government reported earlier today that the trade deficit rose significantly in September. The Department of Labor, a Cabinet department of the US government, also stated that import rates climbed by 0.7% in October.