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Instant view: U-Mich sentiment falls to lowest since Aug 09
September 17, 2010 / 2:13 PM / 7 years ago

Instant view: U-Mich sentiment falls to lowest since Aug 09

NEW YORK (Reuters) - Consumer sentiment unexpectedly worsened in early September to its weakest level in more than a year, as distress over jobs and finances intensified among upper-income families, a survey released on Friday showed.

KEY POINTS: * The Thomson Reuters/University of Michigan’s preliminary September reading on the overall index on consumer sentiment came in at 66.6, down from 68.9 in August. * “Confidence edged downward in early September, as consumers judged prospects for the national economy less favorably,” the survey’s director Richard Curtin said in a statement. * The latest sentiment figure was the lowest since August 2009 and fell short of the median forecast of 70.0 among economists polled by Reuters. * The entire decline in the sentiment index was recorded among households with incomes above $75,000, while confidence among lower-income families improved, the survey showed. * Curtin said the divergence between the two income groups likely stemmed from worries over a protracted delay to an extension of federal tax cuts to families with incomes above

$250,000.

COMMENTS:

ROBERT RUSSELL, PRESIDENT OF INVESTMENT MANAGEMENT AND FINANCIAL PLANNING FIRM RUSSELL & COMPANY, FAIRBORN, OHIO:

”This sentiment reading shows us that the consumer is still confused about the direction of the economy (and) is another signal of uncertainty. It is a decent barometer, but you have to also look at the other economic data.

“Some of the other data we had this week, like initial claims, are more positive trending.”

MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO:

“It’s reiterating the concern about the role of the U.S. consumers in this recovery. More worrying is the quite significant drop in the outlook component of the data. So it plays into the uncertainties about what a sustainable recovery would look like. I‘m not surprised to see the market struggling a bit on this. As for Fed action, I think next week’s meeting might be too early, but (the data) adds to the argument that the Fed might down the road have to look at some further monetary policy stimulus.”

TOM SIMONS, MONEY MARKET ECONOMIST, JEFFERIES & CO., NEW YORK:

”The economic conditions index actually ticked up, but it was the outlook that fell sharply. The survey is broken down in responses by income. People in households who are making over $75,000 pulled the index down. There’s a good chance the uncertainty surrounding the tax cuts probably drew down the sentiment.

“I think that the Treasury market was kind of already -- it’s already up on a number of different things - I don’t think this changes much. I feel like it’s going to be more about headlines coming out of Europe. And the day will probably end rather early due to the holiday coming up.”

MARK LUSCHINI, CHIEF INVESTMENT STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA

“Needless to say, while I don’t think that expectations should have been exceedingly high, it is stubbornly low. It’s disappointment that sentiment isn’t showing improvement while other data points have shown receding fears of a double-dip. This shows a consumer who is highly skeptical in regards to his or her own circumstances in relation to macro conditions. This suggests we could see weak consumer spending, which will lend itself to further anemic economic growth.”

MARKET REACTION: STOCKS: U.S. stock indexes slipped BONDS: U.S. Treasury debt prices added to gains DOLLAR: U.S. dollar added to gains

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