Confidence among U.S. consumers rose less than expected in July as gasoline prices dropped from record highs and the labor market continued to show strength, a private report today indicated.
The Reuters/University of Michigan's final index of consumer sentiment rose to 90.4 from 85.3 in June. Last month's figure was the lowest in 10 months. The reading was below the university's preliminary figure, released on July 13, showing the confidence level at 92.4.
Cheaper gasoline and greater job stability helped boost the index from its lowest level in 10 months and may support consumer spending even as stock prices plunge. Most of the Michigan survey responses came before this week's market rout, in which the Standard & Poor's 500 index lost more than 3 percent.
``Consumers have been hammered by high gasoline and food prices but still are looking at a healthy job market and as long as you're employed and comfortable in your employment, then confidence is not going to decline much,'' said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. ``Stocks are secondary to jobs in these types of surveys.''
Stocks Rise
Markets plunged since then, with the Standard & Poor's 500 Index ending yesterday at 1482.66, down from the record trading close of 1553.08 reached on July 19. Stocks rose in today's early trading.
Economists forecast the index would end July at 91.2, according to the median of 58 forecasts in a Bloomberg News survey. Estimates ranged from 89 to 95.
The group's measure of expectations, which some economists view as a proxy of future consumer spending, rose to 81.5 from 74.7 in June. The gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to buy big-ticket items like cars, rose to 104.5 from 101.9.
Consumer spending rose at a 1.3 percent annual pace last quarter and the economy expanded at a 3.4 percent rate, the Commerce Department said earlier today. Spending probably will accelerate in the second half of the year, though not reach the 3.7 percent rate reported for the first quarter, economists surveyed by Bloomberg News forecast.
``The linchpin of consumer confidence has been favorable job and income prospects,'' Richard Curtin, director of the survey, said in a statement today. ``Without this mainstay, consumers would find rising food and gas prices harder to accommodate and their record debt more difficult to repay.''
Initial jobless claims dropped this month, showing there is some resilience in the labor market. That may help support income growth, which some economists have credited with giving consumers wherewithal to spend even as high gasoline prices and lower home values sap discretionary income.
Gasoline Prices
The average price of a gallon of regular gasoline has come off the record $3.23 at the pump that was set on May 23 and ended yesterday at $2.92, according to figures from AAA. Prices still are up 26 percent this year.
Consumers in the Michigan survey maintained their outlook on inflation for the next year. They forecast an inflation rate of 3.4 percent in one year, the same as in June and said inflation probably will run 3.1 percent over the next five years, compared with a forecast of 2.9 percent in last month's survey.
Starbucks Corp., the world's largest chain of coffee shops, said July 23 it will raise the price of its drinks by an average of 9 cents a cup to counter higher dairy, energy and coffee costs.
``Things are moving up, and this is the right time to do this,'' spokesman Brandon Borrman said of the price and cost increases. The company previously raised prices in October, by 5 cents a cup, or 1.9 percent.
Office Depot Inc., the world's second-largest office-supply retailer, said yesterday that slower sales of furniture, office supplies and technology were a drag on second-quarter profit and revenue. Sales at North American stores open at least a year fell 5 percent, marking the first time in more than three years that same-store sales decline in consecutive quarters.
Other retailers are experiencing better results. Sales at U.S. retailers rose 3 percent last week from the same period a year ago, the second-biggest jump since April, the International Council of Shopping Centers and UBS Securities LLC said July 24. The group forecast sales at stores open at least a year may rise as much as 3 percent this month, helped by early back-to-school shopping.
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