A combination of wages that refuse to grow and gasoline and food prices that seem to do nothing but grow are lowering consumers’ expectations that they will earn more money a year from now, according to Goldman Sachs data.
In fact, such expectations are at their lowest in 25 years.
“Households are already very pessimistic about future real income growth,” Goldman economist Jan Hatzius writes in a client letter obtained by CNBC.
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Weaker incomes could ultimately lower overall economic growth.
“A slowdown in job growth would presumably translate into a further deterioration in (expected and actual) real income growth. This would heighten the downside risks to our current forecast that real consumer spending will grow 2.5 percent to 3 percent over the next year and might call for another downward revision to our forecast for U.S. GDP growth in 2011 and 2012,” Hatzius says.
Real hourly wages have fallen 2.1 percent on an annualized basis over the past six months, a rate of decline not seen in 20 years, according to Goldman.
The Conference Board's Consumer Confidence Index fell to 60.8 from a revised 66 in April due to higher fuel prices and an iffy jobs outlook.
"Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects," says Lynn Franco, director of The Conference Board Consumer Research Center, according to Bloomberg.
Fears over inflation, which eased in April, picked up again in May, Franco adds.
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