People in the US felt worse about their personal finances early this month, but rising confidence in the labor market’s prospects should help to support spending and the broader economy.
The Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 72.5 early this month, data showed on Friday, from 75 last month. It was the first drop in six months and reflected households’ anxiety over their finances.
The ebb in morale comes despite the recent run of relatively strong data, including solid job growth and manufacturing activity.
“While there is plenty of positive momentum in the economy, there is still plenty to worry about,” said Lindsey Piegza, an economist at FTN Financial in New York.
The Conference Board’s survey of consumer attitudes published last month also showed a fall in sentiment.
Households continue to struggle under the weight of huge debt loads and a sustained decline in house prices also is not helping.
While consumers worried about incomes, they reported a record level of optimism about job prospects.
“This pattern of responses — less favorable current assessments and more favorable prospects — is not surprising. It simply indicates that consumers find their current situation all the harder to bear when improvement is finally in sight,” sentiment survey director Richard Curtin said.
Employers added 243,000 workers to their payrolls last month and the unemployment rate fell to a three-year low of 8.3 percent.
Some economists were not too worried about the slide in sentiment early this month.
“The Michigan index is not seasonally adjusted and tends to be weak in February, so the decrease in sentiment reported this year may partially be a reflection of this seasonal pattern,” said Daniel Silver, an economist at JPMorgan in New York.
Boris Schlossberg, head of research at GFT Forex in Jersey City, New Jersey, said there was a “massive discrepancy” between consumer sentiment and buying patterns.
“We are seeing better-than-expected retail sales on a weekly basis,” he said. “If we get three consecutive months of 200,000-plus new jobs, then sentiment may catch up.”
Other data on Friday underscored the economy’s firming tone.
The trade deficit widened to a six-month high of US$48.8 billion in December as goods imports climbed to the highest level since July 2008, just before the financial crisis caused world trade to plunge.
US exports grew slightly in December, with records set for petroleum, services and advanced technology goods.
“The improvement in both import and export demand can be seen as a positive development as it not only suggests that the US economy is enjoying improved global demand for its products, but the improving US economy is being reflected in growing appetite for foreign goods,” said Millan Mulraine, senior macro strategist at TD Securities in New York.