Consumers Less Optimistic as Incomes Decline

Despite recent job gains, consumers are less optimistic about the economy as worries about falling income dampen their outlook.

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The Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 72.5 in early February, from 75.0 in January, which was the highest level since February of last year.

Only 23 percent of all consumers surveyed in early February reported an improving financial situation, down from 29 percent in January, and last year’s 30 percent average.

“The personal financial situation of consumers remained dreary,” said survey director Richard Curtin.

One in four families reported declines in income this month, but while more households were worried about shrinking paychecks, Americans reported a record level of optimism about job prospects.

“More consumers spontaneously mentioned hearing about increases in employment and job opportunities than ever before recorded in the long history of the surveys,” Curtin said. Positive reports of job growth have doubled over the past three months, he added, setting a record in early February.

The U.S. Labor Department announced last week that the monthly jobless rate fell to 8.3 percent in January, a near three-year low.

The survey’s gauge current economic conditions, as perceived by consumers, fell to 79.6 in early February, from 84.2 in January. The gauge of consumer expectations for the next six months fell to 68.0, from 69.1.

While employment figures have been improving, consumers are still wary of an uncertain economic climate that could take further hits from housing and be tripped up by debt problems in Europe.

Economic uncertainty led consumers to lower their short-term inflation outlooks in February, though they raised their expectations on long-term inflation.

According to the survey, expectations for one-year inflation fell from 3.3 percent in January to 3.2 percent in early February, while the survey’s 5-to-10-year inflation outlook rose to 2.9 percent from 2.7 percent in the previous four months.

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