ANN ARBOR, Mich. – The tightening of the credit markets is having an effect on consumers, according to the latest Reuters/University of Michigan preliminary Index of Consumer Sentiment released today.
The index fell to 83.3 this month from 90.4 in July, according to Bloomberg News.
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The lowest reading since last August, it was well below both the 89-point average reading registered for the last 12 months and the 88-point median forecast from a Bloomberg survey of 60 economists.
The decline comes as earlier drops in gasoline prices are being overwhelmed by tightening credit – which has the potential to prevent businesses from hiring – and the unstable U.S. stock markets, analysts noted.
“[The drop] is consistent with a consumer who’s reining in spending,” Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York, told Bloomberg News.
Today’s Consumer Sentiment report is an early gauge of how the recent stock market plunge has affected consumers. “Households have noticed what’s going on, and if the situation does not stabilize and improve there most likely will be some influence on consumer spending,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York.
Consumers in the Michigan survey saw an improved outlook for inflation. They forecast a one-year inflation rate of 3.2 percent, down from the 3.4-percent they forecast in July, and expect the five-year rate to be 2.9 percent, a drop from the 3.1-percent rate registered in last month’s survey.
The Reuters/University of Michigan Surveys of Consumers is produced each month by the University of Michigan and distributed by Reuters. The preliminary report is based on a telephone survey of about 300 households; the final results, due June 1, will include about 500 responses. Additional information is available at www.sca.isr.umich.edu.
