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CONSUMER SENTIMENT slumps as retail sales jump | Reuters

August 12, 2011

Consumer sentiment slumps as retail sales jump

By Pedro Nicolaci da Costa and Alexandra Alper

WASHINGTON/NEW YORK | Fri Aug 12, 2011

(Reuters) – Consumer sentiment worsened sharply in early August, falling to the lowest index level since 1980, even though retail sales posted the biggest gains in three months in July, separate reports on Friday showed.

Consumer sentiment dropped to its lowest point in more than three decades as fears of a stalled recovery combined with despair over government policies, a survey showed.

The Thomson Reuters/University of Michigan’s preliminary August reading on the overall index on consumer sentiment fell to 54.9, the lowest since May 1980, down from 63.7 in July. It was well below the median forecast of 63.0 among economists polled by Reuters.

High unemployment, stagnant wages and the protracted debate over raising the U.S. government debt ceiling spooked consumers who were polled before the Standard and Poor’s downgraded the U.S. government’s credit rating on August 5.

“Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government’s role,” survey director Richard Curtin said in a statement.

“This was more than the simple recognition that traditional monetary and fiscal policy measures were largely spent. It was the realization that the government was unable or unwilling to act,” Curtin added.

Buying plans for household durables and vehicles declined in early August, falling back to their recession level lows.

Bad times in the economy were expected by 75 percent of all consumers in early August, just below the all-time peak of 82 percent in 1980. Buying plans for household durables and vehicles declined in early August, falling back to their recession level lows.

“It counters the really encouraging news that we had with retail sales earlier this morning,” said Millan Mulraine, senior U.S. macroeconomics strategist at TD Securities in New York.

“While consumers may have hung in July, it may have not been the case in August. It’s more consistent with the economy we’ve been seeing. It’s more important nonetheless to gauge where sentiment is. It shows where spending is headed,” Mulraine said.

U.S. stocks slipped after the consumer sentiment data after earlier posting gains on the retail sales data. U.S. Treasury yields were little changed after the data.

via Consumer sentiment slumps as retail sales jump | Reuters.

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