US consumer sentiment pulls off 11-year high
Sunday, 15 February 2015
WASHINGTON, Feb 14 (Reuters): US consumer sentiment unexpectedly fell in February from an 11-year high amid worries over slowing economic growth, suggesting a recent weakness in spending might last for a while.
The ebb in sentiment came despite strong job gains over the last three months, signs of an acceleration in wage growth as well as cheaper gasoline prices, factors that economists had expected would buoy consumer spending in the months ahead.
"As it stands, the pullback in confidence, along with the early-year decline in retail sales, hints of slower consumer spending growth in the first quarter," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. The University of Michigan said on Friday its consumer sentiment index slipped to 93.6 in early February from a reading of 98.1 in January. Still, the index was at the second highest level since January 2007.
Economists had expected the sentiment index to hold steady.
Households early this month were less optimistic about current economic conditions as well as the outlook over the next six months. The survey also showed a fairly big fall in household intentions to purchase long-lasting manufactured goods, while plans to buy automobiles were little changed.
Consumer spending, which accounts for more than two-thirds of US economic activity, weakened in December and January, surprising economists who had expected lower gasoline prices and a relatively robust jobs market to unleash a wave of discretionary spending.
Softer consumer spending has prompted economists to lower their estimates for first-quarter growth.
Still, economists remain optimistic about prospects for the remainder of this year. Growth this year is expected to be the strongest since 2005, driven in part by consumer spending.
"Consumers appear to be calibrating their assessment of current economic conditions and their expectations for the future, but the decline in sentiment isn't cause for alarm," said Jim Baird, chief investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.