Consumer Confidence in U.S. Falls to Five-Month Low (Update2)
By Shobhana Chandra
July 27 (Bloomberg) -- Confidence among U.S. consumers declined in July to a five-month low, a sign the lack of jobs will limit the economy’s recovery.
The Conference Board’s confidence index fell to 50.4 from a revised 54.3 in June, figures from the New York-based private research group showed today. The gauge was forecast to drop to 51, according the median estimate in a Bloomberg News survey.
Sentiment may be slow to improve until companies start adding to payrolls at a faster rate, and the Federal Reserve projects unemployment will take time to decline. Today’s figures showed income expectations at their lowest point in more than a year, posing a risk for consumer spending that accounts for 70 percent of the economy.
“Consumers’ faith in the economic recovery is failing,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, whose forecast of 50.3 was the closest among economists surveyed by Bloomberg. “The job market is slow and volatile, and it’ll be 2013 before we see any semblance of normality in the labor market. It means weaker purchases.”
Stocks were little changed after the report. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,115.12 at 10:27 a.m. in New York. The yield on the 10-year Treasury note increased to 3.03 percent from 2.99 percent late yesterday.
A separate report today showed home prices in 20 U.S. cities rose 4.6 percent in May from the same month last year. The increase in the S&P/Case-Shiller index of property values was the biggest since August 2006, the group said in New York. While higher than a year ago, the measure is still down 29 percent from the peak reached in June 2006.
Average During Expansion
Estimates for consumer confidence ranged from 46 to 55.5 in the Bloomberg survey of 73 economists after a previously reported 52.9 reading in June. The Conference Board measure averaged 98 during the expansion that ended in December 2007.
The group’s measure of present conditions decreased to 26.1 in July from 26.8 a month earlier. The gauge of expectations for the next six months dropped to 66.6, the lowest since February, from 72.7.
The proportion who expect their incomes to rise over the next six months fell to 10 percent, the lowest since April 2009, from 10.6 percent. The percent of respondents expecting more jobs to become available in the next six months decreased to 14.3 from 16.2 the previous month.
Jobs Hard to Get
The share of consumers who said jobs are currently plentiful held at 4.3 percent. Those who said jobs are hard to get increased to 45.8 percent from 43.5 percent.
“Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement.
Today’s report is in line with the preliminary reading of the Thomson Reuters/University of Michigan confidence index, which declined in July to the lowest level since August 2009.
“An important drag on household spending is the slow recovery in the labor market and the attendant uncertainty about job prospects,” Fed Chairman Ben S. Bernanke told lawmakers on July 21. He repeated the central bank’s forecast for a “moderate” economic rebound.
It’ll take a “significant” amount of time to restore the almost 8.5 million jobs lost in 2008 and 2009, Bernanke said.
Consumer Borrowing
Americans are less willing to take on debt without an improvement in the labor market. Consumer borrowing dropped $9.1 billion in May, following a revised $14.9 billion slump in April that was initially estimated as an increase, according to a Fed report on July 8.
Ford Motor Co., the second-largest U.S. automaker, said U.S. vehicle sales in 2010 will be 11.5 million to 12 million. That’s down from the Dearborn, Michigan-based company’s prior forecast of 11.5 million to 12.5 million. Last year’s 10.4 million vehicles was the lowest annual total since 1982.
“Consumers are worried about their personal balance sheet,” Lewis Booth, Ford’s chief financial officer, said in an interview on July 23. “While they’re paying back their debts, they’re reluctant to take on more debt. And a car is a big purchase.”
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