Income worries weaken consumer sentiment
U.S. consumer sentiment fell further than previously estimated in February, hitting a five-month low as concern about incomes and jobs in a slowing economy weighed on confidence, a survey showed Friday.
The Reuters/University of Michigan Surveys of Consumers said the final February reading of its consumer sentiment index slid to 91.3 from 96.9 at the end of January, which was the highest reading for the index in two years.
February’s result came in below the median forecast of 93.5 in a Reuters poll of economists and was the lowest reading on the index since 85.4 in September.
Worries about jobs and incomes were particularly acute in lower-income households, according to the survey. Financial strains among this group could signal further stresses on the shaky sub-prime mortgage market, the survey noted.
The sub-prime sector comprises riskier mortgage deals, some of which have gone awry in the recent housing market downturn. Some analysts have blamed the recent turbulence in the financial markets partly on the industry’s troubles.
“Consumer confidence continued to slide in late February due to rising concerns about the outlook for the national economy,” a statement accompanying the data said.
“Importantly, the weakness in the personal finances of lower-income households indicates the likelihood of mounting delinquencies in the sub-prime market in the months ahead, but the data do not indicate any heightened potential for the spread of delinquencies into the prime market,” it added.
Regarding this week’s turmoil in global stock markets, the statement said too few interviews were conducted after the downturn to affect February’s data.
The Reuters/University of Michigan index of current economic conditions fell to 106.7 in February from 111.3 in January, while its final measure of consumer expectations dropped to 81.5 from 87.6.
The survey’s one-year inflation expectation index held steady at 3% in February, but its five-year inflation expectation index dipped to 2.9% from 3%.
Earlier Friday, William Poole, president of the St. Louis Federal Reserve Bank, dismissed fears that the U.S. economy was heading into a recession, although he said it was not possible to rule out a sharp drop in growth.
