Sentiment Falls As Consumers Worry About Long-Term Outlook

Consumer sentiment fell sharply in the preliminary April reading by Thomson Reuters/University of Michigan Surveys of Consumers, surprising many economists. Combined with the decline in overall retail sales, the decline had forecasters worrying again about the negative impact of the payroll tax increase and the cutbacks in federal spending.

The preliminary April Consumer Sentiment Index fell to 72.3, the worst reading since July last year. The index stood at 78.6 just two weeks ago in the final March reading. In the meantime, the March jobs report showed mediocre employment growth, which may be a factor in falling confidence. The Expectations and Current Economic Conditions Indexes also fell.

Richard Curtin, Surveys of Consumers chief economist, said many Americans are now expecting unemployment to rise and lower after-tax income. On the other hand, plans for auto and home buying remain positive, and rising home and stock market values are expected to support consumer spending.

Most observers have been somewhat surprised that consumer confidence and spending have held up despite the payroll tax increases and federal spending cuts that kicked in automatically in March.

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