Consumer Confidence Falls as Gas Prices Start to Rise
Consumer confidence fell in February as gas prices started to rise from a six-year low and damped Americans’ optimism about the economy.
The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 93.6 from a final January reading of 98.1 that was the highest since the start of 2004. The median projection in a Bloomberg survey of economists called for no change from last month.
Prices at the gas pump have climbed this month from a six-year low, and the survey showed more Americans were less upbeat about the labor market after hearing of dismissals in the oil patch. Consumers also said they were less enthusiastic about making big purchases.
“Low gas prices have especially helped lower-income households, although consumers now widely anticipate that gas prices will edge upward during the year ahead,” Richard Curtin, director of the Michigan Survey of Consumers, said in a statement.
Estimates of the 69 economists in the Bloomberg survey for the sentiment measure ranged from 96 to 100.
The Michigan sentiment survey’s index of expectations six months from now decreased to 87.5 from 91 last month. The gauge of current conditions, which measures Americans’ views of their personal finances, fell to 103.1 in February from 109.3 a month earlier that was the highest since January 2007.
Americans expected an inflation rate of 2.8% in the next year, up from 2.5% in January. The average cost of a gallon of regular gasoline was $2.23 as of Feb. 11. The price has edged up from an almost six-year low of $2.03 reached on Jan. 25, according to motoring group AAA.
The Michigan reading corroborates another measure of sentiment. The Bloomberg Consumer Comfort Index retreated to a five-week low of 44.3 in the period ended Feb. 8.
The Michigan index averaged 75.5 from the start of this expansion through last month, compared with 88.8 in the five years leading to the last downturn that started in December 2007.
Progress in the labor market has underpinned sentiment. Job gains in January capped the strongest three months of payroll growth in 17 years.
Employers added 257,000 last month following advances the previous two months that were bigger than previously reported. The jobless rate increased to 5.7% in January from 5.6% as more than a million Americans entered the labor force seeking work.
Favorable economic fundamentals have kept companies such as Dearborn, Michigan-based automaker Ford Motor Co., upbeat about the outlook.
“Growth in the manufacturing sector remains solid despite some throughput issues on the West Coast, low fuel prices provide a significant boost to consumer disposable income, and employment conditions remain on a positive track,” Emily Kolinski Morris, Ford’s chief economist, said on a Feb. 3 sales call.
Wages may be poised to pick up. Average hourly earnings advanced 2.2% in January from the same month in 2014, just above the 2% average since the recession ended in June 2009.
