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Jillian Berman
Bloomberg
Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
The biggest one-week slump in stocks since 2008 and the threat of default on the nation’s debt may have exacerbated consumers’ concerns as unemployment hovers above 9 percent and companies are hesitant to hire. Rising pessimism poses a risk household spending will cool further, hindering a recovery that Federal Reserve policy makers said this week was already advancing “considerably slower” than projected.
“The mood is very depressed,” said Chris Christopher, an economist at IHS Global Insight Inc. in Lexington, Massachusetts. “Consumers are very fatigued and very uncertain. In the short term, people are going to pull back on spending.”
Estimates of 69 economists for the confidence measure ranged from 59 to 66.5, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
Stocks, which initially pared gains after the report, climbed as higher-than-estimated earnings tempered concern the economy is slowing. The Standard & Poor’s 500 Index rose 0.8 percent to 1,182.45 at 10:37 a.m. in New York. Treasuries increased, pushing down the yield on the benchmark 10-year note to 2.24 percent from 2.34 percent late yesterday.
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