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US consumer confidence declines on jobs, mortgage rates

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US consumer confidence declines on jobs, mortgage rates

Consumer confidence in economy activity declined to its lowest level in five months, as weaker job growth and higher mortgage rates weighed on Americans.

The preliminary reading of the Thomson Reuters/University of Michigan Consumer Sentiment Index declined more than 5 points over the previous month, with a reading of 76.8 for September. The median projection from economists was 82, according to Bloomberg. The survey found higher mortgage rates will limit growth in the housing market and spill over to other segments of the US economy, which suggests household spending might need more time before it picks up.

In a separate report, retail spending was down 0.2 percentage points in August, according to the Census Bureau. Retail and food services sales for August were $426.6 billion, up 0.2 percent from the previous month, and 4.7 percent from a year ago.

The US economy added 273,000 jobs in July and August, the weakest back-to-back gains in a year. On the flip side, unemployment claims are falling and the unemployment rate is improving, but analysts warn it’s for the wrong reasons. Labour force participation—the number of people employed or actively looking for work—has declined to 35-year lows.

Mortgage rates are approaching two-year highs, which is also weighing on consumer confidence. Slow employment growth is delaying purchasing activity, which represents the largest segment of economic activity. Consumer credit increased $10.4 billion in July after an $11.9 billion increase the previous month, according to a report earlier this week from Board of Governors of the Federal Reserve. Credit has been expanding almost continuously since 2010 as the US recovered from the 2008 financial crisis.

Weaker-than-forecasted job growth hasn’t shifted expectations for a Federal Reserve bond taper next week. The Fed will cut its monthly stimulus by $10 billion to $75 billion, according to the majority of economists surveyed by Bloomberg.

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