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US Consumer Sentiment Falls Short of Forecasts: Reuters/University of Michigan

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US Consumer Sentiment Falls Short of Forecasts: Reuters/University of Michigan

Personal consumer confidence unexpectedly fell in the United States, as expectations among lower- and middle-income families declined after the holiday season.

The Thomson Reuters/University of Michigan Consumer Sentiment Index fell from 83.5 to 80.4 in January. Economists surveyed by Bloomberg forecasted a rise to 83.5. The monthly indicator is used to gauge consumer willingness to spend over the short-run. The unexpected drop tells us consumers will likely remain cautious in spending, as the US economy continues to stabilize.

The gauge of current conditions, which capture consumers’ outlook concerning personal finances, fell from 98.6 to 95.2. The gauge of expectations over the next six months decreased from 72.1 to 70.2.

“Upper-income income households benefited from continued strong gains in income as well as increases in stock and home values,” said survey director Richard Curtin. “Low- and middle-income households were mainly concerned about lackluster growth in employment and income, and anticipated less improvement in long-term prospects for the economy.”

The US economy could only muster 74,000 additional jobs in December, marking the worst month of jobs gains since January 2011. Labour force participation continued to decline, shifting the jobless rate down to 6.7 percent, the lowest since October 2008. At the same time, average hourly earnings fell from 0.2 percent to 0.1 percent in December, official data from the Labor Department showed last week.

While colder than normal weather was partly to blame, growing dissatisfaction among long-term job seekers suggests more underlying imbalances in the US economy. The number of unemployed declined by nearly 500,000 last month, as labour force participation fell back to 1978-lows.

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