Consumer Sentiment Declines to Lowest in Four Months

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Craig Warga/Bloomberg News

Consumer confidence in the U.S. declined in July to a four-month low as Americans’ outlook for the economy dimmed.

The Thomson Reuters/University of Michigan preliminary index of sentiment dropped to 81.3 this month from 82.5 in June. The median projection in a Bloomberg News survey of 68 economists called for a July reading of 83.

Higher prices at grocery store checkout lines are souring attitudes and straining household budgets as they take a bigger bite out of workers’ paychecks. Absent a pickup in wage growth, a higher cost of living raises the risk that consumer spending, which accounts for almost 70 % of the economy, will cool.

“It’s a steady picture, the consumer is optimistic but not getting too carried away,” Sean Incremona, senior economist at 4Cast Inc. said. Higher wage gains would provide “the big boon” for the consumer, he said.



Estimates for the Michigan sentiment gauge in the Bloomberg survey of economists ranged from 80 to 85.2. The index averaged 89 in the five years before December 2007, at the beginning of the last economic slump, and 64.2 during the recession.

The Michigan sentiment survey’s measure of expectations six months from now decreased to a four-month low of 71.1 from 73.5 the prior month. The current conditions index, which measures Americans’ assessment of their personal finances, rose to 97.1 this month from 96.6 in June.