Consumer confidence sagging into uncertainty
Bloomberg News Service
WASHINGTON — Optimism among U.S. consumers fell for a third consecutive month in August and home construction declined, threatening to undermine the economic expansion this year.
The University of Michigan's preliminary index of consumer sentiment fell to 87.9 from 88.1, people familiar with the report said. Housing starts fell 2.7 percent in July, the second decline by that amount.
"This is not a very cheerful outlook for the economy," said Paul Kasriel, director of economic research at Northern Trust Corp. in Chicago. "I don't know if you're going to see a complete collapse in consumer confidence in the near term, but I think we could see a gradual erosion over time."
The drop in confidence helps explain why some investors expect central bankers to lower interest rates for a 12th time since the beginning of last year. Confidence matters because it may influence consumer spending, which accounts for two-thirds of the economy.
The decline in housing starts last month brought the annual pace of construction to 1.649 million houses, apartments and townhouses.
Economists had expected starts to stay in July at the previously reported pace of 1.672 million for June, based on the median of 56 forecasts in a Bloomberg News survey.
The back-to-back decreases indicate "some caution among builders regarding the economic outlook," said William Sullivan, senior economist at Morgan Stanley in Jersey City, New Jersey.
Building permits, an indicator of future construction, fell 0.5 percent to 1.698 million units at an annual rate last month after rising to 1.706 million in June.
Starts of single-family homes fell 2.2 percent in July to a 1.321 million-unit rate, the lowest since April. July starts of multifamily homes, which include apartment buildings and townhouses, fell to a 328,000 annual rate.
Economic growth slowed in the second quarter to a 1.1 percent annual rate, down from a 5 percent pace in the first three months of the year. Manufacturing and services stalled in July, while employers added 6,000 jobs, fewer than a 10th as many as were created in June.
