Tuesday 29 July 2014
 
»
 
»
Story

Harsh winter hits US consumer sentiment

New York, March 15, 2014

US consumer sentiment weakened in early March as an unusually harsh winter appeared to dim views on the economy's prospects.

The preliminary Thomson Reuters/University of Michigan index of consumer sentiment fell to 79.9 in March from 81.6 the prior month, a survey showed yesterday.

Analysts had expected sentiment to improve, and the weak tone of the report could be a sign that severe weather had put consumers in the doldrums. That would back the view that the US economy was only temporarily stuck in a soft patch and would resume stronger growth once the weather improves.

"Most of the decline ... can be attributed to the unseasonably bad weather," said Capital Economics economist Amna Asaf.

Parts of the US have suffered colder-than-normal temperatures and blizzards over the winter, which may have contributed to several months of weak hiring.

If weather is the culprit, then the Federal Reserve can feel more confident about continuing the winding down of a bond-buying stimulus programme. The Fed started trimming monthly bond purchases in January.

The sentiment index was at its lowest level since November. It was largely dragged down by a dip in consumer expectations for future growth.

There were some signs of strength in the report. Those polled expected the highest rate of annual income gains since November 2008.

"Expectations of income gains were ... consistent with a tightening labour market," said Barclays Capital economist Cooper Howes.

A separate report from the Labour Department pointed in the opposite direction with regard to inflation, as a decline in US producer prices in February suggested little building of inflationary pressure.

The government's seasonally adjusted producer price index for final demand dropped 0.1 per cent last month.

On its own, the price data would make policy makers feel more comfortable holding interest rates near zero for many more months.

"There is nothing in this report that raises any concerns about inflation," said LPL Financial economist and investment strategist John Canally. "The economy is running too far below capacity for that to happen."

US inflation has held at a very low level in recent years because of a persistently high unemployment rate.

The value of the US dollar slipped against the yen following the price data's publication, suggesting investors felt the report buttressed the view that the Fed would hold interest rates extremely low into next year.

Analysts had forecast a slight increase in prices received last month by businesses such as factories, retailers and wholesalers. The price index had risen 0.2 per cent in January.

Final demand for goods rose 0.4 per cent in February. Final demand for services dropped 0.3 per cent. The Labour Department said about 80 per cent of the decline in its services index was due to lower margins for retailers of apparel, footwear and accessories.

In the 12 months through February, producer prices increased 0.9 per cent, the smallest one-year gain since May 2013.

Producer prices excluding volatile food and energy costs fell 0.2 per cent. Another gauge of core producer prices - final demand less foods, energy, and trade services - nudged up 0.1 per cent.-Reuters




Tags: US | consumer | winter |

More INTERNATIONAL NEWS Stories

calendarCalendar of Events

Ads

Buy high quality China wholesale Health & Beauty , Electronics, Sports & Outdoors , Computers, Video Games, Toys & Hobbies Cell Phones, Automobiles and other wholesale products directly from reliable Chinese wholesalers or Factories on DHgate.com