The Economy

Consumer Sentiment Wavers

A five-point drop in the University of Michigan survey means lower consumer spending could last for awhile.
Katie Kuehner-HebertFebruary 13, 2015
Consumer Sentiment Wavers

Consumer optimism slipped in early February due to renewed concerns over employment and wage growth, as well as a diminished outlook for the domestic economy, a key survey of consumers showed Friday.

The University of Michigan’s consumer sentiment index fell to 93.6 in early February, from 98.1 in January.

“Although confidence reversed the January gain, returning to the December level, the sentiment Index was still higher than any other time since January 2007,” the university’s Surveys of Consumers chief economist Richard Curtin said in a press release.

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The February decline was larger among residents of the Northeast and Midwest, who had to cope with unusually harsh winter storms, while residents of the South posted modest increases in confidence, Curtin said.

Low gas prices have especially helped lower income households, although consumers now widely anticipate that gas prices will edge upward during the year ahead,” he said.

Early February’s small reversals were “hardly sufficient” to change the university’s 2015 forecast that real personal consumption expenditures would grow by 3.3%, Curtin said.

A Reuters story on Friday says that the university’s index reading on consumer sentiment suggests that weaker spending “might last for a while.”

“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,” BMO Capital Markets senior economist Jennifer Lee tells Reuters.

However, spending forecasts for the remainder of the year remain positive.

“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,” Jim Baird, chief investment officer for Plante Moran Financial Advisors, tells Reuters.

Separately, the Labor Department said that import prices fell 2.8% in January, after falling 1.9% in December, due to lower costs of oil and other goods. It was the largest drop in six years.