U.S. Consumer Sentiment Plummets

Add this to the Hurricane Katrina damage assessment — U.S. consumer sentiment, which fell more than 12 points from August’s reading.

The widely watched index by the University of Michigan revealed Friday consumer sentiment fell to 76.9 this month from 89.1 in August, MarketWatch reported.

Most economists had been expecting a modest drop of a few points, but that was before Katrina shocked residents of New Orleans and other Gulf Coast communities.

If these declines were part of the normal economic cycle we would now call for a recession in the U.S. But they aren’t; the index is responding to a shock, and we expect it quickly to rebound, said Ian Shepherdon, chief U.S. economist at High Frequency Economics.

After Sept. 11, (2001), the index made up all the ground lost, and more, by January ’02. This seems as good a guide as any now, though in the meantime we expect a couple of very rough months for consumers’ spending, he said.