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Consumer Sentiment Slips to a Six-Month Low

Thomson's Reuters reported Friday that the recent wave of disappointing data is getting to Americana, as the nation's consumer sentiment fell to a six-month low this month after reaching a near five-year high in May.  The group issued a preliminary reading on its monthly consumer sentiment index, compiled jointly with the University of Michigan, showing a reading of 74.1, well below the 79.3 reading from the prior month.  The reading also trailed the consensus estimate from economists in a recent Bloomberg survey, which called for a reading of 77.5.  It was the weakest reading in the measure since December's 69.6 result.

The reasons behind Americans' slipping outlooks are plentiful, including the ongoing debt crisis in Europe, which an increasing number of analysts around the globe are threatening may derail the entire global economy.  In addition, Friday's report showed that nearly a third of the survey's respondents reported a decline in income this month, and the job prospects portion of the survey crossed over the negative barrier, meaning more respondents were pessimistic on job opportunities over the next six months than were upbeat.

Consumer sentiment is a closely watched indicator because it is used to predict all-important consumer spending, which accounts for more than two-thirds of the overall US economy.  And Friday's consumer sentiment reading is not the only recent data pointing to a pullback in spending by US shoppers, as a separate report issued earlier in the week showed retail sales fell for a second straight month in May after steadily increasing in each of the first three months of the year.

The Reuters / UofM sentiment index's reading on current economic conditions slipped to 82.1 this month, its lowest level in six months and well below the consensus estimate of 85.3 projected by analysts in the Reuters poll.  That measure reached a reading of 87.2 in last month's final reading, a high of more than four years.  A reading of consumers' expectations for the next six months fell to 68.9, the lowest since December and below the median forecast for a reading of 71.8.  That measure reached a near five-year high in May.