Job and wages worries spark drop in consumer confidence
CONFIDENCE among US consumers unexpectedly fell in August as concern over jobs and wages grew.
Figures yesterday, including falling prices, underscore the damage that the biggest drop in gross domestic product in any recession since the 1930s has had on households and retailers.
With little sign that $1 trillion of injections into the banking system is feeding through to inflation, Federal Reserve policy- makers are forecast to sustain their efforts to stimulate the economy until a recovery is secured.
“If consumers are lacking confidence, then they will not be able to help us spend our way out of this long, dark recession,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi in New York.
The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 this month, the lowest since March, from 66 in July. The measure reached a threedecade low of 55.3 in November.
The Labour Department said its consumer price index was flat in July, and dropped by 2.1pc – the most in six decades – from July 2008.
The worst employment slump in seven decades has caused salaries to stagnate, rocking even the Americans who still have jobs.
The need to rebuild savings following the record drop in wealth from the plunge in stocks and home values will keep limiting spending in coming months, analysts said.
Retailers have used discounts to lure consumers on tight budgets. WalMart, the world’s largest retailer, said sales at established US stores fell 1.2pc, due to falls in grocery prices.
On a more positive note, industrial production rose for the first time in nine months in July as a federal “cash-forclunkers” programme spurred demand for cars.
“It’s a start of the recovery in manufacturing,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “A lasting recovery in manufacturing depends on whether the pick-up in auto demand can be sustained,” he added.
