U.S. consumer sentiment unexpectedly slumped in early October as worries about declining incomes drove consumer expectations back down to the lowest level in more than 30 years, a survey released on Friday showed.
The Thomson Reuters/University of Michigan's preliminary reading on the index on consumer sentiment sagged to 57.5 from 59.4 at the end of September. It fell short of the median forecast of 60.2 among economists polled by Reuters.
Consumers' outlook also deteriorated with the gauge of consumer expectations falling to its lowest level since May 1980, at 47.0 from 49.4. The index had fallen to this level in early September before being revised up at the end of the month.
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The component has shed more than 20 points since the beginning of the year. The survey's barometer of current economic conditions dipped to 73.8 from 74.9.
"Overall, the data indicate that a recessionary downturn is likely to occur," survey director Richard Curtin said in a statement.
"Even if the economy manages to avoid the formal recession designation by (the National Bureau of Economic Research), real consumer expenditures will not be strong enough to enable the more robust job growth that is needed to offset the negative grip of economic stagnation on consumer behavior."
Thirty-nine percent of consumers cited income declines as the reason why their finances have recently worsened, while 65 percent of all households expected no income increase during the year ahead. Both levels were the highest ever recorded by the survey.
The gloomy survey was in contrast to earlier U.S. Commerce Department data that showed retail sales rebounded in September at their fastest pace in seven months.
"This October confidence number reflects the volatility we've seen in equities and commodities and the uncertainty coming out of the euro zone. Overall, this takes some luster off otherwise good numbers," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.
Treasurys prices pared losses immediately following the data, while other financial markets were little changed.
Improvement in inflation expectations was a silver lining, with one-year inflation expectations easing to 3.2 percent from 3.3 percent. The survey's five-to-10-year inflation outlook fell to 2.7 percent from 2.9 percent.
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