Consumers lose confidence over concern for jobs
Mounting gloom over the outlook for jobs and wages caused American consumers to lose confidence in September, indicating spending will take time to recover.
The Conference Board's sentiment index declined to 48.5 this month, lower than the median forecast of economists surveyed by Bloomberg News and the weakest level since February, according to figures from the New York-based private research group yesterday.
Another report showed home prices cooled, hurt by a slump in sales following the end of a government tax incentive.
Household purchases, which account for about 70pc of the world's largest economy, may be constrained by a jobless rate which is projected to average more than 9pc through 2011. Best Buy Co is among companies planning to use promotions to spur sales in order to overcome the sombre mood of shoppers.
Consumers "certainly are worried about jobs" said David Sloan, a senior economist at 4Cast in New York. They "are facing considerable headwinds".
The median forecast of 75 economists surveyed projected the index would drop to 52.1. Estimates ranged from 48 to 55. The gauge averaged 96.8 during the economic expansion that ended in December 2007.
Home prices in 20 cities rose at a slower pace in July from a year earlier, a report from S&P/Case-Shiller showed. The group's index of property values increased 3.2pc from July 2009, the smallest year-over-year gain since March.
The gauge is a three-month average, which means the July data is still being influenced by transactions in May and June that may have benefited from a tax break worth as much as $8,000 (€5,900).
Sales contracts had to be signed by the end of April and initially closed by June in order to qualify for the credit. The closing deadline has since been extended to the end of this month.
Unemployment, a lack of confidence and mounting foreclosures will probably weigh on the housing market for the rest of the year.
"Now that we're getting data that's starting to show some post-tax credit information, we're beginning to see some weakness on the surface," said Michael Feroli, chief US economist at JPMorgan Chase in Washington. "Sales have come off and the concern is that you're going to see prices follow."
Stocks rose, erasing losses sustained after the reports, as shares of healthcare and consumer companies advanced. The yield on the 10-year Treasury note declined to 2.47pc from 2.53pc on Monday.
The Conference Board's measures of present conditions and expectations for the next six months both dropped, yesterday's report showed.
Fewer respondents thought more jobs would become available and the share of those who expected incomes to rise fell to the lowest since February.
There is reason for consumers to worry about jobs. US chief executive officers turned less optimistic in the third quarter as fewer projected that sales and hiring will improve, a survey showed.
The Business Roundtable's economic outlook index fell for the first time since the beginning of 2009.
The economy grew at a 1.6pc pace in the second quarter, down from the 3.7pc annual rate posted in the first three months of the year.
Economists surveyed this month forecast growth will average 2.1pc from July through to December. (Bloomberg)