The economic recovery is looking increasingly dicey, as consumer spending and confidence both slid to their lowest levels of the year amid tumbling gas prices and a still-grim jobs forecast.
Americans – especially wealthier ones – are feeling pessimistic and cautious this month. An index of sentiment from Thomson Reuters and the University of Michigan slipped to 73.2 from 79.3 in May, marking its first decline in 10 months and reaching its lowest level since December.
A measure of consumers’ feelings about their current conditions and an index of their expectations over the next six months also reached lows for the year. The main gauge, however, remained higher than last June’s 71.5 level.
The data don’t bode well for consumer spending, which is responsible for the majority of the nation’s economy. Households with annual incomes above $75,000 propelled the declines as they cut back on plans to buy cars and make other major purchases.
Less than a quarter of the group, whose spending patterns hold more weight than their less moneyed counterparts, expect their finances to improve in the year ahead compared with 37% in May.
Just 10% of Americans like current economic policies – a record low, driven by “a growing recognition that federal policies to bridge the fiscal cliff will not even be discussed until the very last minute,” according to a statement from Richard Curtin, the chief economist for the study.
That has consumers saving more while scaling back purchases, the government said Friday.
Consumer spending dipped less than 0.1%, or $4.7 billion, in May in its weakest showing since November, according to the Commerce Department. April’s spending, previously reported as rising 0.3%, was revised down to a 0.1% increase.
Though less pressured by gasoline prices, Americans are buying fewer durable goods – items such as large appliances that are designed to last at least three years.
The savings rate in May ticked up to 3.9% from 3.7% in April. Without taxes and adjusting for inflation, incomes increased 0.3% in the best monthly increase in two years.