Consumer confidence in the U.S. declined in September to the lowest level since April, indicating household spending may take time to pick up.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment this month fell to 76.8 from August’s 82.1. Economists in a Bloomberg survey called for 82, according to the median projection.
Payrolls had the smallest back-to-back gains in a year and mortgage interest rates are hovering close to a two-year high, weighing on confidence. The restrained pace of hiring makes it harder to spur consumers’ purchases, which account for about 70 percent of the economy.
“Consumers have things to worry about,” Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “Confidence will improve gradually.”
Estimates in the Bloomberg survey ranged from 77 to 85. The index averaged 64.2 during the 18-month recession that ended in June 2009, and 89 in the five years leading up to the slump that began in December 2007.
A separate report from the Commerce Department today showed retail sales rose less than forecast in August. The 0.2 percent increase was the smallest in four months and followed a revised 0.4 percent July gain that was bigger than previously estimated, the report said.
The Michigan sentiment survey’s current conditions index, which takes stock of Americans’ view of their personal finances, fell to a five-month low of 91.8 in September from 95.2 in August.
The measure of expectations six months from now plunged to 67.2, the lowest since January, from 73.7 last month.
Americans expect an inflation rate of 3.2 percent over the next year, up from 3 percent in the prior month. Over the next five years, they expect a 3 percent rate of inflation, up from 2.9 percent.
Among other confidence measures reported recently, the Bloomberg Consumer Comfort Index stabilized last week after four straight declines.
Rising mortgage rates may be reining in confidence. The rate on a 30-year fixed loan was at 4.57 percent as of Sept. 12, close to the highest level since July 2011, according to Freddie Mac data.
Payrolls expanded by 169,000 workers last month after rising 104,000 in July, Labor Department data showed on Sept. 6. The jobless rate dropped to 7.3 percent in August, the lowest since December 2008, as workers left the labor force. Other figures this week showed job openings fell in July to the lowest level in six months.
Household wealth continues to get a boost from the recovery in the housing market, which is driving up home values, and from advances in equity prices.
Vehicle sales remain a bright spot. Cars and light trucks sold in August at the fastest annualized rate since November 2007, according to data from Ward’s Automotive Group. Results at General Motors Co., Ford Motor Co. (F:US) and Toyota Motor Corp. exceeded analysts’ estimates.
Even with the gains, executives at automakers are watching the signals from the labor market and other parts of the economy to assess the outlook for demand.
Recent “job growth is consistent with lackluster gains and after-tax incomes which are running at less than 1 percent year-over-year growth during the January to July period,” Ellen Hughes-Cromwick, chief economist at Dearborn, Michigan-based Ford, said on a Sept. 4 sales call. “As an offset, low borrowing costs and rising consumer wealth should continue to support spending growth going forward.”
Housing-related businesses are benefiting from the rebound in the industry even as higher borrowing costs pose a restraint. Home Depot Inc., the biggest U.S. home improvements retailer, projects rising home prices this year will spur spending on renovations, according to Chief Executive Officer Frank Blake.
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