Confidence among US consumers unexpectedly dropped to a one-year low in September, indicating the biggest part of the economy is being handcuffed by a struggling labour market.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 66.6 from 68.9 in August, the group said today. This month’s reading was less than the most pessimistic forecast in a Bloomberg News survey.
Flagging optimism with unemployment close to a 26-year high may increase the risk consumers will cut back on their purchases, which account for 70 per cent 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.”
To attract shoppers, companies such as Wal-Mart Stores Inc and Kroger Co are discounting merchandise. The US cost of living, minus food and energy prices, was unchanged in August, the Labor Department said today.
