U.S. Economy: Consumer Sentiment Exceeds Forecast
Confidence among U.S. consumers rose more than forecast in September as the pace of job losses slowed and the economy showed signs of pulling out of the recession.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 70.2 this month from 65.7 in August. The index was forecast to rise to 67.5, according to a Bloomberg survey of economists. A government report today showed inventories at U.S. wholesalers fell in July as higher sales helped distributors reduce excess supply.
Americans are starting to grow more upbeat after suffering the biggest destruction of wealth on record from a slump in stocks and home prices and companies are ramping up production to replenish stockpiles. Consumers may still be wary of increasing the spending that makes up 70 percent of the economy as they focus on building savings and paying down debt.
“We can be encouraged that consumer sentiment is healing,” said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York, which at 70 had the closest forecast in the Bloomberg survey. “Good news continues to come through, bad news continues to diminish. It’s better, but it’s not good yet.”
The University of Michigan measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars and homes, rose to 71.8 from 66.6.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to 69.2 from 65 in August.
Stocks Fell
Stocks fell after the reports. The Standard & Poor’s 500 Index closed down 0.1 percent from yesterday at 1,042.73 in New York. Earlier, the index had gained as much as 0.4 percent.
Gap Inc., Limited Brands Inc. and American Eagle Outfitters Inc. on Sept. 3 reported smaller August sales declines than analysts had forecast. San Francisco-based Gap, which also operates Old Navy and Banana Republic stores, said sales at outlets open at least a year fell 3 percent. Limited said its sales dropped 4 percent and American Eagle reported a 7 percent decline.
Starbucks Corp., the world’s largest coffee shop operator, said Sept. 9 it is removing 30 U.S. stores from a list of locations it planned to close after sales and profits improved. The Seattle-based company had planned to shutter about 800 U.S. stores and about 160 international cafes.
Wholesale Inventories
A Commerce Department report showed wholesalers’ stockpiles fell by a greater-than-forecast 1.4 percent in July, after a revised 2 free credit reports.1 percent drop in June. Wholesale inventories have had the longest series of declines since records began in 1987. Sales rose 0.5 percent, the third straight gain.
Investment in new equipment and other orders for long- lasting items may help boost U.S. gross domestic product and lead the economy out of the recession, President Barack Obama’s chief economist said today.
“I’m very encouraged by what we’re seeing, for example, in those advanced durable goods orders,” Christina Romer, chairman Christina Romer, chairman of the White House’s Council of Economic Advisers, said in an interview on Bloomberg Television. “Eventually, firms are going to say we need workers to produce these things.”
A Labor Department report today showed prices of goods imported into the U.S. rose in August for the fifth time in six months, led by petroleum costs. Prices excluding fuels rose 0.4 percent. Export prices rose 0.7 percent, indicating overseas demand is also starting to recover.
Growth Forecasts
The U.S. this quarter will emerge from the worst recession since the 1930s, economists say. The economy will grow at a 2.9 percent annual rate from July through September, according to the median of 61 estimates in a monthly Bloomberg News survey.
A Labor Department report last week showed the pace of job losses slowed in August, even as the unemployment rate rose to a 26-year high of 9.7 percent. Companies cut payrolls by 216,000 workers, after a 276,000 drop in July.
The number of Americans filing first-time claims for jobless benefits dropped last week to the lowest level since July, the Labor Department said yesterday. Applications fell by 26,000 to 550,000 in the week ended Sept. 5.
The economic recovery will probably be “lackluster,” hobbled by strains in financial markets and weak consumer spending, Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday.
The Federal Reserve said Sept. 9 that 11 of its 12 regional banks reported signs of a stable or improving economy in July and August. Five districts, including San Francisco, home to the biggest regional economy, “mentioned signs of improvement,” the Fed said in its Beige Book business survey.
Even so, “consumer spending remained soft in most districts,” according to the Fed report. “Loan demand was described as weak, and many districts reported that credit standards remained tight.”