With improved views on the economy, consumer sentiment rose in October to the highest reading since July, while remaining at relatively low levels, according to data released Friday by the University of Michigan and Thomson Reuters
The final sentiment reading for October reached 60.9, compared with a preliminary October reading of 57.5, and a September level of 59.4. Despite the modest improvement, consumers remain concerned about personal finances, and with “widespread distrust” of Washington, D.C., politicians their gloom is likely to remain, according to Richard Curtin, chief economist for the consumer survey.
“The upcoming debates about spending cuts and tax hikes surrounding the budget resolution will increase uncertainty and cause consumers to become even more prudent spenders,” Curtin said in a statement. “Although a renewed downturn in the economy has a 50-50 chance of starting around the start of 2012, it is even more likely that growth will not be robust enough to restore consumer optimism about their job and income prospects.”
Economists polled by MarketWatch had expected a slight increase in October to 58 with consumers somewhat cheered by stock gains.
The sentiment reading, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession.
Consumer spending makes up the largest portion of the economy, and economists watch confidence readings to get a feel for the direction of spending. Still, analysts have noted a recent breakdown in the relationship between sentiment and spending — consumers have been spending more than would be expected given recession-level sentiment. Further, given that the labor market has been steadily, though slowly, adding jobs since 2010, some have been expecting somewhat higher sentiment results.
