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Business Title: Consumer Sentiment in U.S. Unexpectedly Falls to One-Year Low, Index Shows Sept. 17 (Bloomberg) -- Confidence among U.S. consumers unexpectedly fell in September to a one-year low, a sign Americans will be less inclined to ramp up spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 66.6 following a reading of 68.9 in August, the group said today. Economists forecast the measure would rise to 70, according to the median estimate in a Bloomberg News survey. Flagging optimism with unemployment close to a 26-year high of 10.1 percent may increase the risk consumers will cut back on their purchases, which account for 70 percent of the economy. Staff reductions at companies such as FedEx Corp. indicate it will take years to recover the 8.4 million jobs lost in the recession. “Already cautious consumers are even more cautious,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Consumer spending has certainly been a weak part of the recovery and there is no sign in these numbers of any sudden change in that.” Forecasts for the September reading in the Bloomberg survey of 65 economists ranged from 68 to 73. The index, which declined this month to the lowest level since August 2009, averaged 89 in the five years leading up to the recession that began in December 2007. Stocks fell and Treasury securities rose after the report. The Standard & Poor’s 500 Index declined 0.1 percent to 1,123.7 at 10:09 a.m. in New York. The yield on the 10-year Treasury note fell to 2.71 percent from 2.76 percent late yesterday. Consumer Prices Separate figures from the Labor Department today showed consumer prices rose 0.3 percent in August for a second month. Excluding energy and food, which are volatile month to month, prices were unchanged. The University of Michigan gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, rose to 78.4 from 78.3 in the prior month. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, decreased to 59.1, the lowest since March 2009, from 62.9. Consumers in the confidence survey said they expect an inflation rate of 2.2 percent over the next 12 months, the lowest in a year, compared with 2.7 percent in August. Over the next five years, the figures tracked by the Federal Reserve, Americans expected a 2.8 percent rate of inflation, the same as the prior month. As Americans remain cautious about spending, retailers such as Wal-Mart Stores Inc. are feeling the pinch. Customers ‘Challenged’ “Our customer remains challenged,” William Simon, president and chief operating officer of Wal-Mart’s U.S. operations, said at an analyst presentation Sept. 15. “We need to figure out how to operate in this environment.” Second-quarter earnings were not what Wal-Mart “wanted” them to be, Simon said. The world’s largest retailer is experiencing a rising number of transactions being paid for with government-assistance programs and seeing some customers wait to buy baby formula until paychecks or assistance checks are issued, he said. FedEx, the second-largest U.S. package-shipping company, yesterday said it will eliminate 1,700 jobs, less than 1 percent of its global workforce. Slower Growth “We expect a phase of somewhat slower economic growth going forward,” Chief Executive Officer Fred Smith said on a conference call with analysts. “Slower growth is consistent with historical business cycles.” President Barack Obama’s approval ratings have slipped as economic growth slowed this year and employment stagnated. Fifty-six percent of voters said they disapproved of his handling of the economy, according to a poll by Quinnipiac University taken Aug. 31 to Sept. 7. The preliminary Thomson Reuters/University of Michigan consumer confidence report reflects about 300 responses, compared with 500 households for the final survey. Economists earlier this month cut their forecasts for U.S. growth through next year, citing concern elevated unemployment will temper spending and that companies will trim investment plans. The U.S. will grow an average 2.5 percent in 2011, less than the 2.8 percent projected in August, according to the median estimate in a Bloomberg survey. Consumer purchases will slow this quarter to 1.9 percent, from 2 percent in the second quarter, and then accelerate to 2.3 percent at the end of the year, according to the Bloomberg survey. The economy expanded at a 1.6 percent annual pace in the second quarter, dragged down by a wider trade deficit and slowing consumer spending, the Commerce Department estimated Aug. 27.
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