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U.S. Consumer Sentiment Tanks

Posted on: Friday, 30 September 2005, 15:00 CDT

U.S. consumer sentiment plunged in September to its lowest level in more than a dozen years.

The University of Michigan's Index of Consumer Sentiment was 76.9 in September, down from 89.1 in August and 96.5 in July. The one-month decline of 12.2 points equaled the largest monthly decline recorded since 1978, and the combined August and September decline was the largest two-month decline on record, falling a total of 19.6 points.

High gas prices had a devastating impact on consumers' budgets and caused consumers to expect a worsening financial situation during the year ahead, said Richard Curtin of the University of Michigan.

Over the past 50 years, such steep and widespread declines in confidence have typically triggered recessions.

Among the prior declines that sparked recessions, the most comparable situation was in August of 1990, when consumer confidence fell from the about the same level, by about the same amount, and prompted by the same steep increases in gas prices, noted Curtin.

The key issue is whether the rise in federal spending due to Katrina and Rita will be sufficient to offset the decline in consumer spending.

Source: United Press International

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