U.S. consumer confidence collapses in early August at decade low, Retail News, ET Retail


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U.S. consumer confidence fell sharply in early August to its lowest level in a decade, a worrying sign for the economy as Americans gave a shaky outlook on everything from personal finances to inflation and jobs. an investigation revealed on Friday.

The unexpected reading could give Federal Reserve policymakers a break if it translates into lower economic activity in the coming months. The central bank is getting closer to a decision on when to start withdrawing the extraordinary stimulus measures it has put in place to protect the economy from the COVID-19 pandemic.

The University of Michigan said its preliminary consumer confidence index fell to 70.2 in the first half of this month, from a final reading of 81.2 in July. This was the lowest level since 2011, and there have only been two larger drops in the index in the past 50 years. This was at the height of the 2007-2009 recession and during the first wave of closures in April 2020 at the start of the pandemic.

The losses were widespread across all income, age and education subgroups and covered all regions. Economists polled by Reuters had expected the index to remain unchanged at 81.2.

U.S. stock indices fell immediately after the report was released, as the price of gold gained ground. Yields on US Treasury bonds hit their lowest point.

“The new plunge suggests that the latest wave of virus cases caused by the Delta variant could be a bigger drag on the economy than we thought,” said Andrew Hunter, economist at Capital Economics.

Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic. But the recovery shows some indication of cooling.

COVID-19 cases have doubled in the past two weeks to a six-month peak as the more transmissible Delta variant spreads rapidly across the country. Labor shortages in the service sector also persist as supply chain disruptions have continued.

“The resurgence of the pandemic due to the Delta variant has met with a mixture of reason and emotion … mainly disappointed hopes that the pandemic would end soon,” said Richard Curtin, the director of the investigation, in a statement. .

The survey’s gauge of current economic conditions also fell to 77.9 from 84.5 in July while its measure of consumer expectations slipped to 65.2 from 79.0 in July.

The survey also showed that consumers are raising their inflation expectations over the medium term, another measure the central bank is watching closely to ensure inflation expectations stay anchored.

The survey’s one-year inflation forecast edged down to 4.6% from 4.7%, but its five-year inflation outlook rose to 3.0% from 2.8% in July .

Consumer price increases slowed in July, the Labor Department said on Wednesday, but inflation remained broadly at historically high levels amid continued supply chain disruptions and increased demand. strong in travel-related services.

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