NEW YORK (Reuters) - U.S. consumer sentiment worsened sharply in early August, falling to the lowest index level since 1980, according to the Thomson Reuters/University of Michigan's preliminary reading.
"It's a surprise in the steep drop. Some of the readings are even lower than what we saw during the recession and financial crisis. The drop in expectations seems to be that the political situation got people soured and financial markets have gotten people unsettled. People are getting tired that we still haven't seen much of a recovery.
"People's spending doesn't always correspond with their mood. I doubt things are as weak as the sentiment readings suggest, but no doubt people will be cautious in August."
JOE MANIMBO, MARKET ANALYST, TRAVELEX GLOBAL BUSINESS PAYMENTS,
"The number tempers some of the optimism that had accompanied the retail sales figure and I think it is more consistent with the uneven recovery. As a result, that has given the dollar a boost against its riskier rivals like the euro."
MILLAN MULRAINE, SENIOR U.S. MACRO STRATEGIST, TD SECURITIES,
"It counters the really encouraging news that we had with retail sales earlier this morning. While consumers may have hung in July, it may have not been the case in August...It's more consistent with the economy we've been seeing."
"It's more important nonetheless to gauge where sentiment is. It shows where spending is headed...if it continues to stay at these levels, it could continue to show that spending could take a dive in the near future."
"It might be closer to the truth than the retail sales number in the sense that we know there's been heightened uncertainty over the past few weeks... Uncertainty doesn't breed confidence."
"It's a big drop. It's to be expected. The confidence was guaranteed to go down given all the upsets in the market. Hopefully this won't be the precursor of consumers' action in August."
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON
"The destruction in the preliminary reading of Thomson Reuters/University of Michigan Index of Consumer Sentiment (CSI) which crumbled to 54.9 -- a score lower than even that reached during the recession (Nov '08, 55.3) --shows that even more Americans were defensive and thrifty in early August, in their second year of a frail recovery, than in the middle of the crisis. Obviously, more consumers became increasingly convinced that another recession was about to occur.
"The CSI tanked 13.8% from July's score of 63.7, and that score itself was a double digit decline from the month prior--10.9%. The two months of growing pessimism come after May's slight bump in confidence whose suggestion that discretionary spending would pick up again disappeared just as quickly as it came.
"The early pessimism can not be blamed on S&P's downgrade even thought it took place during the survey, because most of the decline had already been recorded (prior to last Friday). In other words, survey respondents immediately reported 1) more negative news of government's role in the economy, 2) a recently worsened economy, and 3) nonexistent income prospects in the year ahead, in the first week of August (before S&P's announcement on the 5th), with no further declines reported the second week of the survey (8th-12th) when life resumed the following Monday."