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Consumer sentiment falls back in August

August 16, 2013|By Don Lee
  • How are consumers feeling about the economy? According to a survey, they're not as optimistic in August as they were in July.
How are consumers feeling about the economy? According to a survey, they're… (Luke Sharett / Bloomberg )

WASHINGTON -- After hitting a six-year high last month, consumers lost some of their gusto in August as news of slower job growth and the latest slide on Wall Street probably sapped some optimism.

A closely followed index of consumer sentiment dropped to 80 this month after climbing to a post-recession high of 85.1 in July, according to a survey by the University of Michigan and Reuters, released Friday.

Analysts on average were expecting a slight improvement in sentiment for early this month, reflecting a dip in gas prices and continued gains in the housing market.

But the recent retreat in stock prices may have dampened confidence. Interviews for the latest survey ended Thursday.

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What's more, economist Amna Asaf of Capital Economics pointed to rising long-term interest rates as a likely factor, along with reports of softer hiring by employers last month.

The expectations part of the index fell to a four-month low, while there was a more modest decline in people's feelings about current conditions.

"Real average earnings growth has been virtually non-existent for several years, and most of the job gains in 2013 have been disproportionately weighted toward part-time positions," said Nate Kelley, an economist at Moody's Analytics, in a note to clients on Friday's report. "Hence, outside of rising home and stock prices, consumers have very little to support a brighter outlook."

Even so, the sentiment index remains well above year-ago levels, and analysts don't think the latest report signals a big change in the outlook for improved consumer spending, which accounts for about 70% of  U.S. economic activity. Asaf, for one, said he still sees consumption growth in the current quarter rising close to 2.5%, compared with the second quarter's moderate 1.8% annual rate.


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