Tax Worries Of Wealthy Push Down Mid-Month Consumer Sentiment Reading

According to Technomic Inc., the wealthiest 25% of households in the U.S. account for nearly 50% of all foodservice spending. Their cutbacks during The Great Recession have severely stressed many foodservice concepts, particularly those at the higher end.

In this light, the preliminary reading on consumer sentiment from the Thomson Reuters/University of Michigan Surveys of Consumers for mid-September might be cause for worry. The index unexpectedly fell to 66.6, down from 68.9 in August. It was lowest reading since August 2009 and significantly below most analysts’ expectations.

While the dreadful employment situation and housing market have been the major drags on the index for nearly two years, the drop so far this month can be attributed entirely to households with more than $75,000 in income, Surveys Director Richard Curtin said. Confidence among lower income families actually improved.

Curtin said the divergence between the groups “likely stemmed from worries over a protracted delay to the extension of federal tax cuts to families with incomes above $250,000.”

The Obama Administration would like to let tax cuts lapse for those with incomes above $250,000, while extending the Bush-era cuts for all families with lower incomes. Republicans and some moderate Democrats in Congress are insisting all cuts be extended.

In the September issue of Blue Chip Economic Indicators, 65% of the economists surveyed believed Congress will allow the cuts to expire only for those making more than $250,000; 30% said none of the cuts will be allowed to expire; and only 4% said all the cuts would expire.

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